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Despite Larger-Than-Expected Build, Gas Prices Up On Cooler Weather Forecasts

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Natural gas storage inventories increased by 87 Bcf for the week ended Oct. 6, per EIA. The injection was larger than most market expectations of an injection in the low 80s.
The prompt month contract, Nov17 is trading higher this morning, up $0.09 to $2.98 per MMBtu, at time of writing.
Despite the large build, market participants reacted to weather news that are calling for a cooler November. This is a common behavior observed over the winter months and expect prices to continue to move with weather forecast updates.

Working gas storage inventories increased to 3.595 Tcf, level 153 Bcf below last year and remain below the 5-year average by 8 Bcf. These inventory levels further support price gains in the short term.

See Drillinginfo EIA’s chart below. This graphic shows projections for end-of-season inventories as of Nov 1. With only four weeks left of the traditional injection season, inventory projections are only 20 Bcf apart between 3.82 Tcf and 3.80 Tcf.

This Week In Fundamentals
The summary below is based on PointLogic’s flow data and DI analysis for the week ending 10/12.

• Supply: dry gas production declined further this week down almost 2 Bcf/d to an average of 72.1 Bcf/d. The declines were mostly due to Tropical Storm Nate and we should start seeing these volumes returning to the market soon. Canadian imports are up 130 MMcf/d.

Demand: total demand saw significant gains from almost all sectors including Power up 2.7 Bcf/d, ResCom 1.4 Bcf/d and LNG exports increased by 0.7 Bcf/d.

• Total supply is down 1.8 Bcf/d while total demand is up 4.9 Bcf/d. The market is significantly shorter this week therefore implying a smaller injection in the 60s Bcf in next week’s EIA release.

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