In an EBW Analytics Group report sent to Rigzone by the EBW team on Friday, Eli Rubin, an energy analyst at the company, said a “bearish” U.S. Energy Information Administration (EIA) report “reset… [gas] market momentum lower”.
The EBW report highlighted that the October natural gas contract closed at $2.939 per million British thermal units (MMBtu) on Thursday. It pointed out that this was down 16.1 cents, or 5.2 percent, from Wednesday’s close.
“Yesterday’s bearish EIA storage surprise refocused the natural gas market on rapidly rising storage levels – and risks of a storage overshoot,” Rubin said in the EBW report.
“Intraday prices dropped to $2.925, down 24.3 cents (minus eight percent) off Tuesday’s high. The key near-term question is if technical support that tested as low as $2.869 on Sunday evening can hold,” he added.
“Production readings remain subdued, although the conclusion to a portion of Permian maintenance may offer upside for supply – and downside risk for prices – next week,” Rubin continued.
The EBW analyst went on to state in the report that, “amid renewed risks of the storage trajectory overshooting higher, October weather may be the decisive factor”.
“If the trend of warming autumns holds, production rises, hurricane threats form, or LNG trips offline, a collapse in the front-month is possible into next week’s expiry,” he said in the report.
“If signs emerge next week that strengthen DTN’s outlook for a colder October, however, averting bearish risks could offer fundamental uplift – creating volatility into next week’s October expiration,” he added.
Rubin went on to warn in the report that “multiple possible bearish risks highlight the balance of price risks remains to the downside”.
In its latest weekly natural gas storage report, which was released on September 18 and included data for the week ending September 12, the EIA said working gas in storage was 3,433 billion cubic feet as of Friday, according to its estimates.
“This represents a net increase of 90 billion cubic feet from the previous week,” the EIA said in the report.
“Stocks were four billion cubic feet less than last year at this time and 204 billion cubic feet above the five-year average of 3,229 billion cubic feet. At 3,433 billion cubic feet, total working gas is within the five-year historical range,” the EIA continued.
In a report sent to Rigzone on September 18 by the EBW team, Rubin noted that the October natural gas contract rose to $3.168 per MMBtu on Wednesday morning “before returning the entirety of gains in the afternoon”.
“Today’s EIA report, with consensus expectations for a 78-81 billion cubic foot build, may provide a catalyst to help prices break in either direction – but the market appears to be finding a short-term equilibrium between bullish and bearish risks,” Rubin said in that report.
“On a bullish note, the downshift in production readings, higher LNG exports … and chances for a colder weather shift may create room for the October contract to push higher,” he added.
“However, storage is 188 billion cubic feet above five-year norms with surpluses growing – and a history of weak October pricing when end of season inventories exceed 3,900 billion cubic feet,” Rubin went on to state in that report.
EBW Analytics Group provides independent expert analysis of natural gas, electricity, and crude oil markets, the company’s site states.
Rubin is an expert in econometrics, statistics, microeconomics, and energy-related public policy, the site adds, noting that he is “instrumental in designing the algorithms used in our models, and in assessing the potential discrepancies between theoretical and practical market effects of models and historical results”.
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