Phil Flynn is writer of The Energy Report, a daily market commentary discussing oil, the Middle East, American government, economics, and their effects on the world's energies markets, as well as other commodity markets. Contact Mr. Flynn at (888) 264-5665
[Jeremiah Shelor, Natural Gas Intelligence]
The Energy Information Administration (EIA) reported a net injection into U.S. gas stocks for the week ended Dec. 1, a bearish miss on what was already a bearish consensus leading up to the report.
EIA said in its weekly report that U.S. working gas in underground storage showed an implied 2 Bcf build for the period, an unseasonable number that’s far looser than the 43 Bcf withdrawn a year ago and a five-year average 69 Bcf withdrawal.
The market would have to go back five years to find the last time EIA reported a net injection during the month of December — a 2 Bcf build recorded for the week ended Dec. 7, 2012.
Word of a potential injection had spread earlier in the week, and the futures market seemed to have already baked in the news. January recorded a small bounce from pre-report levels in the minutes immediately following EIA’s 10:30 a.m. EDT release.
With some overnight warm changes in the weather outlook, January had fallen sharply from Wednesday’s $2.922 settle, pushing down into the $2.775-2.790 area in the lead-up to the report. By 11 a.m. EDT, January was trading around $2.790-2.800.
The market came into Thursday bracing for an unusually light withdrawal, though a net injection wasn’t out of the question, according to some analysts.
A weekly Reuters survey had revealed on average a 7 Bcf net withdrawal. Responses ranged from -66 Bcf to an injection of 3 Bcf. The -66 Bcf prediction was an outlier, with the next most-bullish survey response coming in at -25 Bcf. Responses to a Bloomberg survey ranged from -14 Bcf to +4 Bcf, with a median of -3 Bcf.
IAF Advisors analyst Kyle Cooper had been calling for a 1 Bcf build for the week, echoing Price Futures Group analyst Phil Flynn, who had also called for an injection. Stephen Smith Energy Associates had been looking for a 7 Bcf withdrawal, as had PointLogic Energy.
“The print missed slightly bearish to our estimates and confirms significant week-over-week loosening that the market has priced in recently,” said Bespoke Weather Services in a note issued shortly after the release of the number.
“Elevated production and very warm weather last week clearly allowed for such a print, which has moved us back far closer to the five-year average. However, it appears the surprise bearish print was not much of a surprise at all; prices moved little off the number, lending support to the idea that this may be a ‘buy the rumor, sell the fact’ report. We still see $2.75 support as likely firm, though this print limits short-term upside too.”
The net injection for the week shrank the year-on-five-year deficit to -36 Bcf, versus -107 Bcf last week. Total U.S. gas stocks ended the week at 3,695 Bcf, versus a five-year average of 3,731 Bcf and year-ago stocks of 3,959 Bcf.
The East and Midwest regions recorded weekly withdrawals of 8 Bcf and 10 Bcf, respectively. The Pacific region saw a 1 Bcf withdrawal.
The South Central region injected 21 Bcf for the week, according to EIA, including 12 Bcf injected into salt and 9 Bcf into nonsalt.