Yesterday the DOE reported a 94 Bcf injection to bring total storage to 2.089 Tcf as of May 7th. Analysts were expecting a 102 Bcf injection so the 8 Bcf shortfall helped push Henry Hub futures prices up to highs of 4.414, before ultimately closing at 4.339, a respectable 5.5 cent increase day on day and the June contract’s highest settle since March 17, which led to a slight flattening of the futures curve.
Before the bulls get carried away, they should keep in mind that total storage this season crossed the 2 Tcf point earlier than any other year on record. The average storage level for the first week of May stands at 1.43 Tcf while the previous high was 2006’s 1.99 Tcf. Furthermore, the injection was larger than the 84 Bcf injection seen over the past five years and the 94 Bcf increase seen last year.
All told, storage levels stand 18.4% above the preceding five year timestep — hardly a bullish statistic.
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This build cannot be written off on warmer weather: According to the EIA, temperatures for the country as a whole were close to normal at 63.4 degrees, slightly higher than the normal average of 58.4 degrees.
This week the EIA released its monthly Short Term Energy Outlook and Annual Energy Outlook for 2010. In Monday’s issue of The Schork Report, we will discuss the numbers in depth, but key takeaways include confirmation of greater projected levels of shale production. Given baseline levels of economic growth, shale gas and coal bed methane are on track to account for 34% of total U.S. production in 2035, double the 17% seen in 2008. The majority of growth will come from Shales, with coal bed methane production remaining stable.
In terms of price, the EIA forecasts June to settle at 4.02, although its calculations were carried out as of May 7th so they may not factor in the recent rally in prices. Further out, the EIA expects prices to cross the 5.000 barrier by December 2010, though this is likely a conservative estimate.
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Stephen Schork is the Editor of The Schork Reportand has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.