Energy Finance

The week of June 26 saw a natural gas storage injection of 70 billion cubic feet (Bcf) with total working gas in storage for the at 2,721 Bcf. The storage metric is 28% higher than last year, but significantly down from the 30% surplus last week. The lower injection is a positive indicator for prices, says Michael A. Hall, vice president of oil and gas equity research for Baltimore-Maryland based Stifel, Nicolaus & Co. Inc.

“Current storage fell to a 21% surplus, relative to the five-year average, and down from 22% last week,” says Hall. “This week’s injection was lower than the 85 Bcf injection for the corresponding week last year and the 84 Bcf feet five-year average injection.”

Marking the ninth week of the cooling season, gas in storage rose to 2,721 Bcf, 28% above (603 Bcf) the year-ago level and 21% ahead of the five-year average, he says.

“Our model currently suggests a 1.9 Bcf per day looseness in the supply and demand for gas, down slightly from 2.0 Bcf per day last week. Oversupply and the resulting storage levels in the producing region are quickly reaching an inflection point and we believe additional shut-ins, such as those recently announced by EnCana are increasingly likely. The weeks ahead will be key for front month gas prices for the remainder of 2009. We expect continued volatility.”

Gas prices are rising on the gas storage news, says Hall. ” While we view the dramatic weakness in natural gas prices as a long-term buying opportunity, we remain somewhat measured in the near-term as the current supply and demand balance remains loose. We do, however, continue to recommend building exposure on weakness, with Chesapeake Energy (CHK - $19.21, Buy), Cabot Oil & Gas (COG - $30.34, Buy), and Bill Barrett Corp (BBG - $27.06, Buy) as our top ideas, as well as Atlas Energy Resources (ATN - $19.69, Buy) for those able to participate.”

You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.