Thursday, September 23, 2010

Buoyant Natural Gas

EIA Data release for week ending September 17, 2010:

Working gas in storage was 3,340 Bcf as of Friday, September 17, 2010, according to EIA estimates. This represents a net increase of 73 Bcf from the previous week. Stocks were 175 Bcf less than last year at this time and 195 Bcf above the 5-year average of 3,145 Bcf. In the East Region, stocks were 16 Bcf above the 5-year average following net injections of 53 Bcf. Stocks in the Producing Region were 114 Bcf above the 5-year average of 915 Bcf after a net injection of 19 Bcf. Stocks in the West Region were 65 Bcf above the 5-year average after a net addition of 1 Bcf. At 3,340 Bcf, total working gas is within the 5-year historical range.

Price Data


A significant portion in achieving upward price momentum has been unpredictably moderate temperatures. We are in an environment in which Nat Gas is not needed for cooling nor for heating. Additionally, Hurricane season has yet to come to fruition (that is an oxymoron but rings some truth for an energy trader) and will likely continue upon its uneventful season. However, hope remains in the form of tropical storm Lisa. WIth warmer temperatures in the Atlantic, the potential for greater velocity of headwinds and illustrious destruction increases rapidly; think Hurricane Rita. If the storm hits the North East, I would look for Philadelphia output to stagnate.


We'd like to see the November contracts find support at $4.15/mmBtu. Though the contangion spread between November/December contracts (.216) is much wider than that of December/January (.1620). A scenario could develop in which the November/December spread widens until demand firms for the near-month contracts. Otherwise, spreads should narrow as the near month November contracts gain demand traction. We expect to see sustainable support of $3.98 on October contracts expiring on Tuesday.

December NG: 3-Month Daily Chart


As Alex astutely alluded to yesterday, we are long MINY December Contracts. We will look to'pyramid' once prices move into a tighter range at higher price levels, if there is such a thing.

Patrick M. Ambrus
Twitter: AnalyzeCapital


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