From John S. Herold, Inc.
herold.com
HEAT WAVE HELPING GAS PRICES – SURPLUS STORAGE ERODING
We all know that weather is the wild card in determining natural gas demand, and much of the country recently has been gripped by a heat wave. As a result, we’re not surprised that gas storage injections have been lower than average. However, the growth in storage has been under par for six straight weeks, which is much more sustained than most weather patterns.
While the pattern is encouraging, it is far from unprecedented. Several times in the past storage injections differed by over 100 Bcf in consecutive years during the comparable six weeks.
The true test will come starting on Labor Day, when air conditioning needs fall away. If the recent weekly (15 Bcf below average) pace of inventory build holds through November first, national inventories will drop to the average of the last five years. That would be a remarkable change, both physically and psychologically, from twelve months ago when it looked as though we would run out of places to put the gas. However, stocks remain near record levels, so the commodity is not completely out of the “price risk” woods. High oil prices are helping for now, but crude markets could go down fast if the war premium were eliminated.
September probably will tell the story. If the stock build remains below normal, we’ll have evidence of strong demand fundamentals colliding with restricted supply, which will add real credence to the bullish gas price case. |
