Baby, It's Hot Outside
We are now halfway through the second phase, i.e., the dog days phase, of the summer
Demand for gas-fired power transmission through the first half of the current phase (30 days ended last Friday) has been abnormally strong through the eastern two-thirds of the country. To this effect, injections into underground storage in the Producing and East Consuming market areas over the last four EIA reports have been especially low.
For example, over the previous 17 summers, injections of gas in the Producing Area over the four week timestep ended the first Friday of August typically come in between 400 MMcf/d and 1.5 Bcf/d. Over the corresponding four weeks this summer, the Producing Area is averaging a net delivery of 1.4 Bcf/d.
Given the good cyclability of underground storage in this area, this gas will get replenished by Northeast utilities once the thermometer cools down next month, and therefore does not have any long lasting structural impact on price, current support in the market notwithstanding. In this vein, analysts at The Schork Report highlight that in light of extraordinary weather demand, gas bulls, rather than testing $5, are scrambling to defend $4 on the Nymex.
Bottom line, the recent rebound off of support sub $4 has pushed our daily bias in
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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.