The EIA announced a 54 Bcf injection for the week ended April 14. The full range of forecasts ahead of the release was between a 28 Bcf and a 55 Bcf injection, with an average of a 48 Bcf build. The report is bearish since the injection came in higher than most expectations. Prices are also down 1-2 cents this morning although declines were only expanded by 1-cent temporarily following the release. The prompt contract (May2017) is trading at $3.17 per MMBtu, at time of writing.
Storage Inventories remain above the 5-year average
Working gas storage inventories increased to 2.115 Tcf. Inventories remain below last year and 5-year high levels by 368 Bcf. However, inventories are above the 5-year average by 282 Bcf.
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, this range is up 0.1 Tcf each as April demand has been significantly milder than last year.
Prices Going Nowhere Due to Flat Supply and Spring-Like Demand
The May 2017 prompt month contract has been trading in a tight range between $3.10-3.20 MMBtu over the past couple of weeks with no clear pattern or direction of where is heading to.
From a fundamental perspective, this price action makes sense for the very short term as residential and commercial demand is coming in significantly weak compared to last year. During the first 20 days of April, total demand is down over 6 Bcf/d, mainly driven by res/com losses. On the supply side, production lacks growth as well with dry gas at levels 2.8 Bcf/d lower than last year and total supply (including Canadian imports) down 3.4 Bcf/d. Overall, the market is net long so far in April and this has resulted in larger-than-average injections.
This type of action is expected during shoulder season and can not be projected to continue during the rest of the summer. Drillinginfo continues to expect higher prices from those in the current forward curve in order to allow production growth this year.
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- EIA Reports Storage Injection of 66 Bcf, Includes Revision - June 28, 2018