This morning's EIA natural gas in storage report took everyone by surprise. We started out with this projection.
Bloomberg: The U.S. Energy Department’s natural-gas inventory report, scheduled for release at 10:30 a.m. in Washington, will show that supplies rose 2.6 percent last week, according to a survey of Bloomberg users.At 10:30AM the EIA had this to say: "Working gas in storage was 2,944 Bcf as of Friday, June 8, 2012, according to EIA estimates. This represents a net increase of 67 Bcf from the previous week." This was visibly below the Bloomberg survey.
The government’s report will show that inventories gained 74 billion cubic feet in the week ended June 8 to 2.951 trillion cubic feet, according to the survey.
|Working gas in underground storage compared with 5-year range (source EIA)|
So what's the big deal? Again, we have a technical issue in the market. The nat gas market has been left for dead with the speculative part of the market piling into the short positions. A surprise in the inventory number sent the shorts covering. And in this market a shot covering is not a couple of percent. Natural gas futures spiked over 12% in a short period of time.
|Natural gas active futures contract intraday|
It remains to be seen whether this rally will carry over to next week. But this is a good lesson for other markets with overextended short exposures such as oil, euros, etc.