The Guest Blog

Schork Oil Outlook: Nearby Fundamental Picture Appears As Bearish As Ever

Stephen Schork, Editor, The Schork Report

Last week we ushered in the summer solstice, which also means that the “dog days of summer” are here. According to the Encyclopedia Britannica, this is the period of exceptionally hot and humid weather that often occur in July, August, and early September in the northern temperate latitudes.

The name originated with the ancient Greeks, Romans, and Egyptians; they believed that Sirius, the dog star, which rises simultaneously with the Sun during this time of the year, added its heat to the Sun’s and thereby caused the hot weather. Their belief that dogs were subject to spells of madness at this time also may have contributed to the name. Because people tended to become listless during the dog days, Sirius was held to have a detrimental effect on human activities… including trading energies.

As we see in the , large (>90 Bcf) injections are about to ebb. The U.S. refill season exhibits a distinct seasonal pattern which can be separated into three time buckets. In the first bucket, which generally lasts through early July, is when we see the largest injections of the season, i.e. ?100 Bcf per week. Current injections are averaging 104 Bcf since May 01st. The second bucket of the injection season takes us through the dog-days of July and August. Thus, if we get a hot July/August regardless of the proliferation of nonconventional drilling, we can then expect average weekly injections to fall below 70 Bcf per week. The third and final bucket of the season will take us through the peak hurricane season in September and October. Average injections then tend to rebound as temperatures ease and utilities top off storage ahead of the winter.

Bottom line, the nearby fundamental picture appears as bearish as ever. Underground caverns, mines and aquifers are brimming. The 5-year average surplus (interpolated) inched down by 42 bps to 22.2% but increased by 10 Bcf to 482 Bcf. During last season’s dog days, natural gas demand from the Grid summed 1.55 Tcf. Thus, the current 482 Bcf overhand covers an extra 19 days of last summer’s a/c load.


Stephen Schork is the Editor of, and has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.