06 August 2009 22:49 [Source: ICIS news]
The September contract finished the day down 29.9 cents, while October natural gas values fell by 32.1 cents to $4.007/MMBtu.
Front-month natgas futures had settled each of the last three days above $4/MMBtu, but Thursday's deep price drop came following a US government report showing a 66bn cubic feet (bcf) injection that ran in the face of projections around 60 bcf.
Stephen Smith, principal of Stephen Smith Energy Associates in Mississippi, said most forecasters are within a few bcf of the actual storage figures, especially in the summer.
Thursday's deviation from analyst figures to the US Energy Information Administration (EIA) data was an anomaly, Smith said.
"That's a surprise. It's a little unusual frankly," he said. "It's just one of those statistical errors that puzzle you a bit."
Smith said that that the surplus in US natural gas presents a storage issue in the coming months, and is one of the reasons that natgas prices above $4 were too high.
"There's this essential vulnerability right now that the price is too high inherently given the storage problem coming up in the fall," he said.
Smith's outlook for the major feedstock and power fuel for the US petrochemicals industry is for futures prices to continue to stay below $4.
"My guess is that we're going to see something in the threes," he said, referring to $3/MMBtu, "and pressure in that direction until we get past the storage crunch."
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