The countertrend moves, if and when they happen are amazing.
From the CME:
NG rallying on bullish inventory report
Nothing like a surprise to get the market flowing. Today's Nat Gas inventory report was a surprise on the bullish side in that the weekly injection came in noticeably below the market consensus. The heat wave along the northeast coast certainly contributed to the lower than expected injection level. As of this writing the market is in the midst of an inventory reaction short covering rally that has taken prices higher by almost 4.5 percent. Whether or not this short term rally will continue is a question that will only be answered by how long the heat wave continues and what the short term temperature forecasts turn out to be.
From a technical perspective the spot Nymex Nat Gas futures contract has gone from hovering around the lower range support level all the way to very near the upper range resistance level since the inventory data was released. If the market breaches and closes above the $3.80/mmbtu resistance level the market is likely to then attempt a move to the psychological $4/mmbtu level which the market last traded at back in mid-June.
The latest NOAA forecast is still not overly bullish as it projects the northeast coast heat wave winding down by the end of this coming weekend. Then they are projecting above normal temperatures mostly only over the west with the rest of the country expecting normal to even below normal temperatures (southwest & north east). The eight to fourteen day forecast is not much different other than the northeast is now projected to experience normal summer temperatures. Overall the main price driver of Nat Gas … the weather looks more like a slight negative for prices going forward.
Next week's inventory report covering the current week should show another underperformance in the weekly injection level but beyond that the injection levels are likely to return to outperforming based on the current NOAA weather forecasts for the second half of July.
Thursday's EIA report was bullish versus the market consensus and versus the so called normal five year average but bearish versus last year. The report showed a net injection that was well below at the market consensus but greater than last year but below the five year average net injection for the same period. The 58 BCF injection (below normal for this time of the year) was about 6 BCF below the market consensus calling for an injection of around 64 BCF. The build of 58 BCF was only slightly below my model forecast (60 BCF injection) this week. The year over year inventory situation remains in a deficit position versus last year and has widened this week with the deficit versus the more normal five year average narrowing modestly. The current inventory deficit came in at 34 BCF versus the normal five year average or about a negative 1.2 percent.
This week's 58 BCF injection compares to a 29 BCF injection into inventory last year and an injection for the five year average of 70 BCF for the same week....MUCH MORE
Working gas in storage was 2,745 Bcf as of Friday, July 12, 2013, according to EIA estimates. This represents a net increase of 58 Bcf from the previous week. Stocks were 414 Bcf less than last year at this time and 34 Bcf below the 5-year average of 2,779 Bcf. In the East Region, stocks were 101 Bcf below the 5-year average following net injections of 37 Bcf. Stocks in the Producing Region were 36 Bcf above the 5-year average of 977 Bcf after a net injection of 15 Bcf. Stocks in the West Region were 31 Bcf above the 5-year average after a net addition of 6 Bcf. At 2,745 Bcf, total working gas is within the 5-year historical range.
Here's the EIA.
Bloomberg's analyst survey came in at 65 Bcf, I didn't see Platts.
Here's Energy Metro Desk from earlier this morning, via the CME:
Weekly Natural Gas Storage Survey 7/18/13
Previewing the Energy Information Administration's 7/18/13 report.
Each week, we poll 40 professional storage forecasts for our weekly Natural-Gas Storage Box Scores (as seen in each bi-weekly issue of Energy Metro Desk*). This is North America's biggest and most comprehensive natural-gas storage survey and report.
Editors forecast this week:+71 Bcf
Average: +67.4 Bcf
Median: +68 Bcf
Range: +60 to 75 Bcf
Natural Gas Storage Tealeaves for 7/18/13
So, last week were were convinced the EIA storage report would come in a bit lower then the market and we got it wrong. Our tealeaves misfired. But, thankfully, the EIA reported a spot-on market report so, we're fairly sure folks weren't too disappointed. The average forecast among all the big surveys we track was about 82.1 Bcf and our Metro Desk Consensus came in a wee bit lower at 80.2 Bcf. The bank analyst average was 81.8 and the independant analyst average forecast was lower at 79 Bcf.
We still think last week's report should have been lower, but, so goes our sour grapes maybe. This week we note that roughly 7 out of 10 analysts we surveyed late on Wednesday told us that they thought the risk was to the low side this week. Hmm. Nobody could tell us why exactly, but, low-side risk seemed to carry the day. The folks who see the risk to the high side, however, made some very good arguements. One analyst we heard from noted that "TCO and DOM both showed lower numbers and EEI showed a 20% increase in power generation in the WSC equivalent...plus my S&D model said 73. And, my CDD weather model said 62. How did this all blend together to hit a mid-70's number? Scrapes are now the gold standard, but I do temper them with the others. The residual 4th of July holiday impact gave me enough confidence to go high or go home..." We tend to agree with this fellow.
And, as it happens, we still think that last week's reported number was way too high. This week's Consensus figure was pegged at 67.4 Bcf and we see a bias to the high side, not low side. The spread between the three categories of analysts we track was under 3 Bcf but it was highish at 2.4 Bcf. Like last week, the early view forecast of 67.2 from last Friday is nearly spot on with this week's consensus (67.4). The independent category was highest this week with a 68.1 average forecast and the Survey category was lowest at 65.7 Bcf. Of all the big surveys, Bloomie and Reuters average came in at 64 Bcf and Platts was highest at 68 Bcf. The editor this week is higher than the consensus by nearly 4 Bcf (71), and the EMD All-Star forecast came in higher at 68.3 Bcf. Analyst Ron Denhardt materialized this week and submitted a build of 68 Bcf as well. We think a low to mid 70's build should be right on the money. --the editorHere's today's action in five-minute increments:
Weather Tealeaves
Forecast Courtesy of the Commodity Weather Group (www.commoditywx.com)
Thought of the day: Variable Final 1/3 of July.
The powerful heat ridging over the Midwest and East is in its final
three days before the pattern collapses back to a more variable flow for the final part of July....MORE
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