Even though the weekly storage draw of 78 Bcf was less than consensus (86 Bcf), gas prices rose modestly on the day. But the day was marked more by an intraday spike, more likely revolving around market news of additional potential gas shut-ins (that were later dismissed). The rally was brief, lofting the prompt contract 10 cents, before the gains were mostly washed away. The storage number was more troubling. At 78 Bcf, it signals that Coal displacement is not running as strong as gas prices might suggest and might not be big enough this year to wipe away surplus supply. We read today's storage number as bearish for end-of-injection season prices. The East drew 59 Bcf, the West 8 Bcf, and the Producing Region an anemic 11 Bcf. North American gas prices slid a little lower. Producing Region inventory is 38% ahead of year-ago levels. On the day, the prompt contact was up three cents, to $2.48/MMBtu. The rest of the curve gained a bit more, with the rest-of-2012 up five cents, to $2.93, while calendar 2013 notched four cents higher, to $3.69. To clarify a point from yesterday, we believe that if 2013 rallied back to $4 (not $3), producers would sell. The weather outlook was essentially unchanged on the day and was likely not a culprit in the price move. Cash markets were mixed, with Henry Hub up a penny, to $2.50. SoCalBorder was down a penny, to $2.73.New York prices (Transco-Z6) rose a penny, to $2.92.
Courtesy: Barclays Capital
