ed, in my opinion, whether spot is over futures or vice versa has no bearing on what enters storage. for that matter it doesnt matter if the strip is backwardated, in contango, neutral, distributors are going to inject no matter what.
you have production and net imports making up supply and then you have immediate demand from generation, industry, residential heating/cooling, etc. storage either takes the surplus or withdrawals are made from storage to make up the deficit. if spot under futures during this time of year sounds normal to me. there is a cost of carrying inventory if one were to buy spot and hold until futures delivery.
however, if prices got high enough i could see demand for injecting into storage bidding away from immediate demand. like at $20 ng, industrial demand may throw in the towel, outbid by distributors that still need to ineject for winter. thats probably a rare event though, probably happened last during hurricane katrina.
speaking of which, looking back at last year's prices for this time i see spot was also lower than futures back then. for example, may 7, 2007 spot was $7.64 and futures $7.78. |
