Natural Gas prices are likely to remain bullish on deficit in stored gas is a more pressing issue than ever, according to Deutsche Bank.The bank said gas injected to underground storage over the course of summer plays an instrumental role in satisfying seasonal demand variations primarily in the residential and commercial sector.

In the winter of 2013-14, withdrawal of gas from storage accounted for 18% of supply.This winter, supplies will be 12% lower amidst lower rig counts but higher productivity.

The bank notes tht injection season over April and May has fallen short of it seaonal forecast published at the beginning of April. At the same time, its storage estimates were at the lower end of market expectations. While the volume of gas injected since 5 April has been modestly above the 5-year average, it has not been enough to remove the end of season storage deficit.

"As a result of the slower-than-expected injection, we have lowered our end-of-season storage forecast by 100 bcf to 3,368 bcf down from 3,468 bcf. This would mean that storage becomes only 72% full, well below the ten year average of 84.1%. Such levels were more characteristic of the 1999-2003 period when storage fullnes in November averaged 74.9% and net imports were significantly higher at 9.5 bcf/day versus 3.6 bcf/day in 2013.

Deutsche Bank further said: We believe that exceptionally low inventories of thermal coal at utilities have been suppressing and will continue to suppress demand switching away from coal to natural gas. Operators are likely to reserve coal inventory for the peak months of demand in case the availability of rail capacity remains stretched. As of January, coal stocks in the electric power sector were 26% lower than in January 2013. Consequently the proportion of coal-fired power generation plants with less than 30 days’ worth of inventory is at a relatively high level of 24%.
Source: Deutsche Bank