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Bearish Gas Storage Build Pushes Prices Down Further


Natural gas storage inventories increased by 81 Bcf for the week ended May 26, per EIA. The build included a reclassification of 4 Bcf in the Mountain region resulting in a decreased in working stocks and therefore preventing an 85 Bcf build injection this week. The report is bearish as wither an 81 or 85 build are above average market expectations, which were calling for a 78-Bcf increase in stocks. The full range of forecasts was between 73 Bcf and 86 Bcf. The Henry Hub prompt contract (July 2017) is down 5 cents following the release to $3.018 per MMBtu, at time of writing.

Mild Weather and Production Growth Putting Downward Pressure on Prices
The July contract has lost about 20 cents this week as the price weakness extended following the Memorial Day Holiday.
Persistent mild weather in April and May as well as mild forecasts over early June contributed to the price movement. Additionally, production gains in May to almost 71 Bcf/d are making the market tighter.

Storage Inventories Remain Above the 5-Year Average
Working gas storage inventories increased to 2.525 Tcf, level 370 Bcf below last year but 225 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 4.2 Tcf.

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