Yesterday saw an appreciable swing in prices. The inventory report was initially thought to be ultra-bearish, but quickly became merely bearish. The EIA reported a 96 bcf injection into storage, but 14 bcf of it was a reclassification of gas from base gas to working gas. Basically, gas that was already there that was not otherwise identified as consumable moved into the consumable category. So the initial reaction to the near-triple-digit injection was fierce, and the reaction to the reality check was equally as fierce. On a technical trading basis, the whipsaw action caused an “outside day with a higher close” to be posted, which is indicative of a key reversal. We shall see. The data was robust enough to eliminate the storage deficit, relative to the five-year average, flipping it into surplus. The once gaping deficit to last year has narrowed to 9%, and keep in mind that last year gas inventories reached historic levels. The market remains on course to generate significant builds, as the weather remains temperate, if not cool. The lack of cooling demand is allowing the strong production levels to flow into storage. Prices neared the level where some switching from coal to gas will occur, but it is not enough either. The storage builds over the next several weeks should engender another leg lower, but they will also engender a compelling purchase point. Stay tuned.
Register