19-08-08 The US could end its traditional natural gas injection season with 3.52 tcf in storage at the end of October, just under last year's record 3.545 tcf as mild summer weather, increased domestic production and reduced industrial sector demand begin to ease a tight supply picture, Lehman Brothers said.
In report, Lehman said reported storage injections lagged behind 2007 for most of this year's injection season, reaching a peak year-over-year deficit of 389 bn cf by July 4 and helping to push the front-month NYMEX gas contract to a peak of $ 13.577/mm Btu on July 3.

The report said that after hitting the peak, the front-month contract fell for three straight weeks, dropping to $ 9.09/mm Btu on July 25 and declined to $ 8.135/mm Btu on August 14. While Lehman said the decline occurred "within the context of a broader commodity selloff," it said the "bulk of the price adjustment resulted from the sudden loosening of the supply and demand balance, as indicated by the weekly storage numbers."
Where earlier in the summer the market was tighter than in 2007, "it now appears significantly looser year-on-year through the remainder of the injection season, which should allow US inventories to nearly close the deficit to year-ago levels," the investment bank said.

Lehman attributed some of the "loosening" in the US gas supply and demand balance to a 7 % to 9 % year-over-year growth in domestic production that has more than made up for the decline in liquefied natural gas imports in 2008.
Another factor in the improving supply picture, Lehman added, is a drop in demand from the industrial sector as the "advantages of less-expensive gas [compared with European and Asian prices] and the weak dollar seem to have finally been trumped by the global economic slowdown. It is no coincidence that this mid-summer industrial slowdown coincided with suddenly bearish storage numbers."

Lehman acknowledged that weather remains the wild card in its projection, saying that it expects August and September weather will be "significantly cooler" than last year and that tropical storm and hurricane-related supply shut-ins will not exceed 60 bn cf.