By OGJ editors
HOUSTON, Apr. 18 -- The latest natural gas storage injection data suggest a slightly tightening market despite a storage overhang left over from the heating season during what is normally a seasonally slack period. However, analysts still point to the likelihood of near-term downward pressure on gas prices.
Injections into storage were expected to reach 15-27 bcf for the week ended Apr. 12, according to projections by Oklahoma City-based consulting firm C.H. Guernsey & Co. in an Apr. 15 report. In fact, industry injected 10 bcf into storage for that week, noted New York City-based UBS Warburg in an Apr. 18 research note following the release of American Gas Association's weekly storage survey.
Guernsey noted, "This makes the first week of net injections following a mild 2001-02 heating season."
The estimation is based on the firm's econometric model of gas storage injections and withdrawals.
Guernsey's storage level estimate at the beginning of the injection season put the level of gas in storage 104% above the storage level 1 year prior, the company said.
Donald Murry, vice-president and economist with Guernsey, noted that the 5-year average net injection is less than 2 tcf during the 7-month injection period.
"The current level of natural gas in storage is like getting a 6-week head start on the injection season," Murry said. "If we do not have abnormally warm weather in the key areas using gas for the air conditioning load, the market fundamentals of this supply in storage will help hold down prices during the summer."
Bullish trend?
But unseasonably warm weather in the US Northeast put a bullish—if perhaps short-lived—spin on the market outlook for natural gas prices.
UBS analyst Ronald Barone said that the net injection of 10 bcf for the week ended Apr. 12 reflected a 2 bcf withdrawal in the east, a 6 bcf injection in the producing region, and a 6 bcf injection in the west.
"The net injection compares with the net 9 bcf withdrawal [the prior] week, 64 bcf injection last year, 25 bcf withdrawal the year before and [Wall Street's] 25-30 bcf average estimate," Barone reported.
"Though the week's light injection could suggest a tighter market, 1 week's data do not make a trend, and we would still not rule out an actual loosening in near-term supply-demand dynamics as price elasticity reemerges [evidenced by recent fertilizer plant shutdowns] and incremental LNG shipments reach our shores," Barone said.