Another week, another better-than-expected EIA report, and … another sell-off in natty?
Yesterday’s 209 Bcf delivery was outside the 197 Bcf expected by analysts, yet prices sold off by 1.43%. We are becoming wary of connecting forecasts with market reactions. Consider that since the start of December, the delivery has exceeded analyst expectations for seven out of the ten reports. Yet on the day of the release, prices have fallen for eight out of the last ten weeks.
Further, as illustrated in the Chart of the Day in today’s issue of The Schork Report, one out of the two times that prices rose, the delivery was smaller than analyst expectations! Thus it should come as no surprise that the correlation between the increase/decrease in price and whether the EIA beat expectations comes to an essentially meaningless 0.0723. It seems traders simply do not care about analyst expectations right now. Or, to be less hostile, traders are becoming increasingly concerned with the breakdown regardless of an ostensibly bullish total delivery.
For instance, the 209 Bcf delivery comes well above last year’s 191 Bcf drop and the 2005-09 average of 144 Bcf. In size it ranks as the 2nd largest drop seen for this time-step (beaten only by a 224 Bcf drop in 2007 and 2004). The large draw comes despite heating degree days coming in 5.33% below last year, though they were 5.96% cooler than seasonal norms.
In aggregate the picture is similarly mixed. The cumulative change in heating degrees for 2011 comes to 0.67% cooler than last year and 0.77% cooler than seasonal norms. 2011’s cumulative delivery over the same period comes to 953 Bcf, 31.34% above the norm of 726 Bcf but 10.18% below the 1061 Bcf seen last year.
This may be a function of cold weather in the wrong places, and explain why prices sold off yesterday. As shown in today’s Report, the weather was 22.90% and 10.00% cooler than the reference week last year in the Mountain and Pacific regions, but warmer in key natural gas consuming areas such as the East and West North Central, which came in 3.21% and 2.09% warmer year-on-year. According to NOAA’s interpolated YoY comparisons, Illinois was 5.35% warmer and Indiana was 7.21% warmer.