CO:Barclays: US nat gas inventories sit at a large deficit
LONDON(Commodity Online) : US natural gas markets plunged on a larger-than-expected injection into storage. The prompt month dropped by 17 cents to $4.67/MMBtu. Losses were steepest at the front of the curve as calendar 2011 gave up 17 cents to $4.80 and calendar 2012 lost 14 cents to $5.05. Versus expectations of 78 Bcf, Thursday's storage injection of 80 Bcf was slightly higher than the midpoint of expectations.
Price action also likely reflected disappointment that there was not a follow-on bullish surprise like that seen in last week's storage report. Still, the reference week was warmer-than-normal causing a lower-than-normal seasonal injection.
Inventories currently sit at a large deficit to last year of 255 Bcf, but prices reflect the view that inventories should catch up with last year's injection pace given robust production trends and last summer's consistently hot temperatures that are unlikely to be repeated on the whole. Still, the next couple weeks are likely to show lower-than-normal injections as a result of strong warm deviations, reflecting the heat wave that has gripped much of the eastern half of the country to varying degrees over the past two weeks.
We think that the extremes should recede over the duration of summer allowing for inventories to catch up with and surpass last year's level by the end of injection season. Cash prices were mostly stronger with Henry Hub up 9 cents to $4.92, SoCal Border up 9 cents to $4.82, and Transco Zone-6 NY down $1.82 to $5.63.
While UK NBP D+1 prices continue to trade in a very tight range around the 58 p/therm marker, the forward markets show more life having been buoyed by the increases in Brent seen over the last week. While the UK market remains well supplied on LNG, planned maintenance reducing off-shore production has provided support to prices while the strengthening UK currency has stopped the discount to continental prices from widening. With gas still going into storage at high rates, now at 5-year highs, immediate direction for prices could still be softer although winter prices will continue to take their cue from oil.
