Sam Fletcher
Senior Writer
HOUSTON, Sept. 19 -- Futures prices for natural gas plunged Thursday on the New York Mercantile Exchange after the US Energy Information Agency reported a whopping 102 bfc of gas injected into underground storage during the week ended Sept. 13.
"Assuming no 'lumpiness'" in EIA data, that "marks the largest injection ever recorded for the comparable week," said Ronald J. Barone, UBS Warburg LLC, New York. "With the absence of material national cooling-load demand this week and ongoing favorable arbitrage opportunities, we would not be surprised to see another triple-digit injection in the next storage report."
More natural gas is available for injection as a result of "no significant improvement in national weather-driven demand, a 2% decline in US electrical output, gas utility executives nervously watching the calendar, [and] growing incentives for arbitrageurs to inject now [and] sell forward," Barone said. "Our calculations now suggest that the industry will require an injection pace of 8.4 bcfd (down from 9.2 bcfd) to get supplies to the 3 tcf comfort level by Nov. 1."
US natural gas storage now stands at nearly 2.6 tcf, still 336 bcf short of year-ago levels and down by 120 bcf from the 5-year average for this period (OGJ Online, Sept. 18, 2003).
Natural gas outlook
The October natural gas contract fell by 17.1¢ to $4.47/Mcf Thursday on NYMEX. "The market opened down and quickly sank lower to a new 9-month spot chart low of $4.45[/Mcf] after the EIA storage report was released and then rebounded somewhat to trade between there and $4.52[/Mcf] for the rest of the day," said analysts Friday at Enerfax Daily.
"The market may have broken into another downtrend this week after sinking about 6% in the last four sessions," said Enerfax analysts. "While some traders still expected the 70¢[/Mcf] cash [spot market] discount to January futures [prices] to limit the downside, others say the weak close below $4.55[/Mcf] support should trigger more technical selling."
Natural gas futures prices are "under considerable pressure," as a result of the "EIA storage report, demand-sapping Hurricane Isabel, and weakening crude [price] support," Barone said.
The weakened Category 1 hurricane smacked into the North Carolina coast Thursday, knocking out electrical power to some 2 million people in North Carolina and Virginia. Its winds diminished to 60 mph after it came ashore, and the fast-moving storm was expected to continue to weaken as it moves through Virginia, Pennsylvania, Maryland, New York, and New England.
The storm is "likely to become a net drag for the natural gas industry" by spawning cooler-than-normal weather" that is "expected to reduce [electrical] power (and thus, ultimately, gas) demand [in] the Mid-Atlantic and Northeastern states," said Barone.
Oil prices rebound
Oil futures prices rebounded somewhat Thursday after falling Wednesday on another EIA report that US oil inventories surged by 3.1 million bbl to 279.3 million bbl in the week ended Sept. 12 (OGJ Online, Sept. 18, 2003).
Meanwhile, another fire along an oil pipeline in northern Iraq was reported late Thursday. US officials could not say if the fire in the pipeline that feeds the 150,000 b/d Baiji refinery was sabotage or accidental. Baiji is Iraq's largest refinery.
There have been previous attacks on the export pipeline in northern Iraq that transports oil to Turkey's Mediterranean port of Ceyhan.
The October contract for benchmark US light, sweet crudes regained 14¢ to $27.17/bbl Thursday on NYMEX, while the November position advanced by 8¢ to $27.24/bbl. Unleaded gasoline for October delivery edged up by 0.69¢ to 80.17¢/gal, but heating oil for the same month slipped by 0.41¢ to 70.74¢/gal.
In London, the price for the October contract for North Sea Brent oil continued to slip past Wednesday's 4-month low for a near-month contract, testing support at just above $25/bbl on the International Petroleum Exchange. That contract closed at $25.59/bbl Thursday, down 8¢ for the day after trading at $25.25-25.70/bbl during that session.
There was no market movement in the price for the October natural gas contract, but a slight strengthening of the British pound against the US dollar effectively boosted its price by 1¢ to the equivalent of $3.10/Mcf on IPE.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes declined by 26¢ to $24.90/bbl Thursday.
Contact Sam Fletcher at [email protected]