Storage Injection In-Line with Expectations, Prices Steady on EIA Release

Natural gas storage inventories increased by 78 Bcf for the week ending June 29, according to the EIA’s weekly report. This injection is in-line with market expectations, which were expecting 77 Bcf. The August 2018 contract was trading similar to yesterday’s close at $2.84 per MMBtu ahead of the storage report. Since then, the contract has increased slightly, trading at $2.85 at time of writing.

Working gas storage inventories now sit at 2.152 Tcf, which is 717 Bcf below last year and 493 Bcf below the 5-year average.

Looking ahead, there are 18 weeks left of this injection season and if injections average 75 Bcf/week, inventories will end the season at 3.5 Tcf. This level compares to the previous low of 3.58 Tcf of 2012, which will put upward pressure on prices. This year, the injection season started late with the first injection reported during the last week of April and since, injections averaged 87 Bcf/week. With summer heat starting to materialize, production will need to continue to increase to fill inventory to a level the market is comfortable with before the winter season begins.

See the chart below for projections of the end-of-season storage inventories as of November 1, the end of the injection season.

This Week in Fundamentals
The summary below is based on PointLogic’s flow data and DI analysis for the week ending July 6, 2018.

Supply:

– Dry gas production is up 0.24 Bcf/d week-on-week, with increases in Texas leading the way (+0.12 Bcf/d).
– Canadian imports are up 0.40 Bcf/d week-on-week.

Demand:

– Domestic natural gas demand increased by 1.90 Bcf/d week-on-week, led by the Power sector (+3.67 Bcf/d) and offset mainly by Res/Com (-1.80 Bcf/d).
– LNG exports were down 0.10 Bcf/d week-on-week while Mexican exports were relatively flat.

Total supply is up 0.64 Bcf/d and total demand is up 1.85 Bcf/d week-over-week. With demand greater than supply, a smaller injection is expected in next week’s EIA release. Last year’s injection for the same week was 58 Bcf while the 5-year average is 79 Bcf.

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Source: Drilling Info

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