Natural gas storage- relative injection rates moderating.

For the week ended September 28, natural gas in storage totaled, according to the Energy Information Administration (EIA), 3,653 billion cubic feet versus the 5-year average of 3,468 billion cubic feet. The weekly injection rate of 77 billion cubic feet was below the 5-year average rate of 83 billion cubic feet, but greater than the Street's estimate for a 71 billion cubic foot increase.

This week's storage report may indicate that either storage build rates relative to the 5-year average are flattening out or that we will see a more moderate downside move in the differential. This can be seen on the below chart tracking the difference between current natural gas storage levels and the rolling average.

It may be hard to discern, but the difference between current storage levels and the 5-year average has flattened out over the last four weeks. The chart of the 12-week slope of the differential may be more illustrative of the slowing pace of the decline.

After a differential of 186.8 billion cubic feet on September 7, the difference between current storage levels and the five year average crept up to 192.billion cubic feet on September 14, followed by a decline to 191.8 billion cubic feet on September 21. This week's differential is 185 billion cubic feet, below recent levels but provides little information as to any possible directional change.

It is my thesis that the supply and demand for natural gas is likely coming into better balance (relative to the demand surge we saw during the summer) and that it is growing more likely that current natural gas storage levels will not reach parity with the 5-year average over the short-term. This is barring another demand surge, say due to a power usage spike that results from cold winter weather.