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September 2 Natural Gas Update
Today's natural gas market had the same feel as yesterday with one exception. The natural gas market began to rally around mid-day because of the development of Tropical Depression 9 forming in the eastern Atlantic. But the follow through was not there and the 6 to 10 day forecast was revised to cooler temperatures than predicted although still slightly above average. Tropical depression 9 is a week away from any accurate predictions so the folks that were short (sold exchange contracts in anticipation of buying back at a lower price); it was a great headline to act on. After the dust cleared the market proceeded to drop back down and settled $0.055 cents lower on the day. Estimates for today'’s EIA storage change number are PIRA calling for a build of 50 Bcf, the BNP Paribas survey calling for a build of 53 Bcf and Bentek calling for a build of 54 Bcf while the EIA is projecting a change of 53 Bcf (see below).
Analysts and traders expect government data scheduled for release this morning to show a smaller-than-average build in gas inventories as lingering summer temperatures in areas of the U.S. spurred demand for natural gas-fired power plants to meet air conditioning needs. The U.S. Energy Information Administration is expected to report that 53 billion cubic feet of gas were added to storage during the week ended Aug. 27, according to the average prediction of 14 analysts and traders in a Dow Jones Newswires survey. The survey's median result was also 53 billion cubic feet, with a high estimate of a 60 Bcf build and a low of a 44 Bcf injection.
The storage estimate falls short of last year's 64 Bcf build in storage for the same week and the 62 Bcf five-year average build for that week. If the storage estimate is correct, inventories as of Aug. 27 will total 3.105 trillion cubic feet, about 5.7% above the five-year average and 6.3% below last year's level for the same week. Hotter-than-normal temperatures have driven injections to come in below average throughout the summer. That continued last week in the West and parts of the Southeast including Texas, while the Northeast saw cool temperatures, wrote some analysts.
On the electricity front, switching electric providers in Texas has left some utilities with losses from customers who make a habit of paying a deposit, racking up bills and then opting for a new company and leaving the old debt behind. The Texas Public Utility Commission this month is scheduled to consider preventing some nonpaying customers from switching providers until they pay their previous electric bill, indicated a chairman of a retail provider, "There's a healthy segment out there of people who do switch professionally." This particular retail provider gave away about $30 million worth of electricity last year to people who didn't pay their bills, and as much as $7 million was to people who manipulated the system by switching to another carrier, The Dallas Morning News reported Wednesday. Some consumer advocates say halting switching is counter to the spirit of open-market competition and could be illegal. "It certainly runs antithetical to a notion of a market of choice, and you can't have it both ways," said Rep. Sylvester Turner, D-Houston. Unpaid bills equal about 4 percent of total revenue, according to electric companies representing about a fourth of the Texas industry. Before deregulation, bad debt amounted to about 0.125 percent to 0.675 percent of revenue. The utilities commission is considering a "switch-hold" rule that would allow retailers to place holds on certain nonpaying customers.
On the tropical front, the center of tropical storm Gaston appears on a more southerly track than either Earl or Fiona and will bear watching closely. There is another tropical wave moving off the African coast behind Gaston that will bear watching as well. Gaston was located about 965 miles from the Cape Verde Islands while the maximum sustained winds are 40 MPH with gusts towards 65 miles per hour at times. There is gradual strengthening and this storm is forecasted to strengthen during the next 48 hours while storm force winds extend outward up to 70 miles from the center at this time.