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Another Bearish Gas Injection per EIA


The EIA announced a 67 Bcf injection for the week ended April 28. The full range of forecasts ahead of the release was between a 50 Bcf and a 70 Bcf injection, with an average of a 61 Bcf build. The report is bearish as the injection came in higher than most expectations; however, prices are only down 1 cent following the release. The prompt contract (June 2017) is trading at $3.218 per MMBtu, at time of writing.
Working gas storage inventories increased to 2.256 Tcf, level 359 Bcf below last year but 303 above the 5-year average. See Drillinginfo EIA’s chart below. This graphic shows projections for end-of-season inventories as of Nov 1. Two scenarios are included for summer injections (April-Oct) that result in inventories between 3.6 Tcf and 4.3 Tcf.

Weak injections, Prices Hold

April injections were 41% higher in 2017 compared to 2016. Despite bearish storage builds since the injection season started 4 weeks ago, natural gas prices have remained at +/- $3.20 per MMBtu. It is still early in the season and market players seem to be cautions since there is no clear direction on where the market is heading next. Fundamentals have been bearish so far, but April is a shoulder season month. Longer-term fundamentals remain bullish due to lack of supply growth. See summary below.

Natural Gas Fundamentals Overview

  • Supply:
  • – Natural gas production has recovered some from the lows seen in April as maintenance has been completed. Lower 48 production is currently at 70 Bcf/d, which is still significantly lower than last year (2.2 Bcf/d lower). The main takeaway here is that production is not growing.
    – Canadian net imports are higher this week as a Vector pipeline outage is limiting exports by 1 Bcf/d. This work is related to a new interconnect with Rover pipeline. Outage started on May 1 and will end on May 18.

  • Demand: total demand is up 2.8 Bcf/d this week lead by higher power demand and increases in LNG and Mexican exports.
  • Storage: next week’s injection will be lower again week-on-week as power demand materialized on warmer weather. It will also be the first injection below last year. Early estimates are calling for an injection between 45-52 Bcf, which compares to a 58 Bcf reported in 2016.
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