This is a very bullish article IMO with respect to storage level projections expected.
NYMEX Hub gas ends mixed, June expires higher
Wednesday May 28, 3:40 pm ET
NEW YORK, May 28 (Reuters) - NYMEX Henry Hub gas futures ended mixed on Wednesday, with late short covering driving June to a firmer expiration despite a soft physical market and fairly mild U.S. weather forecasts through next week, industry sources said.
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June climbed 4.5 cents to expire at $5.945 per million British thermal units after dipping early to $5.77, then rallying late to $6. July settled 0.5 cent higher at $6.016. Other months ended mixed.
"Cash continues to lag, which is a function of not having any (hot or cold) weather east of the Rockies, but we still have to put a lot of gas in storage (before winter)," said one Midwest trader, adding mild weather has slowed demand recently but concerns about low storage should underpin prices.
While traders agreed mostly mild weather forecasts for the next two weeks could keep the market on the defensive, most said longer-term bullish fundamentals like low stocks and sagging gas production were likely to limit the downside, particularly ahead of an uncertain summer cooling season.
A Reuters survey released today showed most expected stocks to rise by 90-95 bcf when weekly EIA data are released Thursday morning at about 10:30 a.m. Eastern time.
For the same week last year, stocks gained 72 bcf. On average over the last 5 years, stocks have risen about 73 bcf this week.
In terms of heating degree days (HDDs), the National Oceanic and Atmospheric Administration (NOAA) said last week's tally of 34 was 2 warmer than the prior week and 26 fewer than the same week last year but 5 cooler than normal.
NOAA said there were 24 cooling degree days (CDDs) last week, unchanged from the prior week but 3 fewer than normal and 12 more than the same year-ago week.
Last week's EIA report showed that total U.S. gas stocks of 990 bcf were still 785 bcf below last year and 530 bcf below the five-year average.
Inventories currently stand at 44 percent below last year and 35 percent below the five-year average.
Last month, U.S. gas stocks slipped to a record low of 623 bcf. Prior to this year, the all-time benchmark low for storage was 697 bcf hit in April, 1996, when another cold winter drained storage.
NOAA said it expected 33 CDDs this week, 1 below normal and 7 less than the same year-ago week. NOAA predicted 14 HDDs for this week, 8 less than normal but 5 more than the same week last year.
The 5-year average injection for the remaining 24 weeks of the stock building season is about 1.54 trillion cubic feet, or 64 bcf per week, which would put inventories at 2.5 tcf by Nov. 1, well below the accepted comfort level of about 3 tcf necessary to meet normal winter heating needs.
Producer trade group Natural Gas Supply Association said today it expected inventories to climb to about 2.7 tcf by the end of the storage injection season.
To get to the 3 tcf level in storage by winter, average weekly injections of 84 bcf are needed.
The highest injection total for the 24-week period over the last 5 years was about 1.9 tcf, or 78 bcf per week, in 2001.
With June now off the board, chart traders focused on July, where support was seen at the 40-day moving average in the $5.71 area and then in the low-$5.50s. Further buying was expected at $5.23.
July resistance was pegged at the recent contract high of $6.52.
Private forecaster Meteorlogix expects temperatures in the Northeast and Mid-Atlantic to dip to as much as 8 degrees F below normal Wednesday, then moderate to near normal over the weekend.
Midwest readings will start the period at slightly below seasonal before cooling to 3-8 below seasonal by Sunday.
In Texas, the mercury will warm to 3-6 above normal Thursday-Friday, then drop to slightly below normal on Sunday, while the West will see mostly above normal temperatures for the next 5 days.
The National Weather Service 6-10 day outlook for June 3-7 released Tuesday again called for below normal temperatures for most of the eastern half of the nation, with seasonal or above seasonal readings expected for the western U.S.
In the cash today, Henry Hub swing quotes on average skidded 13 cents to $5.71. Swing gas on Transco at the New York city gate tumbled 19 cents to $6.12 on the mild outlook through next week, while Chicago was 14 cents lower at $5.73.
The NYMEX 12-month Henry Hub strip edged up 0.5 cent to finish at $5.938.
NYMEX said an estimated 91,676 Henry Hub contracts traded today, down from Tuesday's revised tally of 99,911.
Henry Hub open interest on May 27 fell 13,510 lots to 362,197. |
