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Natural gas storage inventories increased by 58 Bcf for the week ending Oct. 19, according to the EIA’s weekly report. However, this build includes a reclassification of 5 Bcf in working gas stocks in the South Central Nonsalt region, implying a flow change of 63 Bcf. A 63-Bcf build is significantly higher than most market expectations, which were in the mid-50s. Every time a reclassification is reported, it brings confusion to market players, and although the report is bearish, gas prices increased following the EIA release. At the time of writing, the November 2018 contract was trading at $3.219, up $0.053/MMBtu.

Working gas storage inventories now sit at 3.095 Tcf, which is 606 Bcf below last year and 624 Bcf below the 5-year average.

For the week of 10/15-10/19 (last week), November 2018 prices traded in a range from $3.198/MMBtu to $3.320/MMBtu. Prices strengthened the early part of the week, only to fall to the weekly low last Thursday. The price drop, however, was not due to the storage report, as prices dropped on the market open. Prices then strengthened Friday to close the week at $3.250/MMBtu. So far this week, 10/22-10/24, prices have traded in a lower range, with closing prices for the November ’18 contract between $3.138/MMBtu and $3.212/MMBtu.

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

EIA Reports 58-Bcf  Build with a 5-Bcf Reclassification (Implied Flow +63)

This Week in Fundamentals

The summary below is based on Bloomberg’s flow data and DI analysis for the week ending Oct. 25, 2018.

Supply:

  • Dry gas production increased 0.75 Bcf/d on the week, with the Northeast (+0.44 Bcf/d) and the GoM (+0.49 Bcf/d) leading the increase.
  • Canadian imports are up 0.02 Bcf/d week over week.

Demand:

  • Domestic natural gas demand increased 0.40 Bcf/d week over week, mainly due to heating demand. ResCom increased 1.86 Bcf/d with an offset in power, with power demand down 1.67 Bcf/d. Industrial demand also increased 0.20 Bcf/d.
  • LNG exports were up 0.47 Bcf/d week over week, mainly due to Sabine resuming full operations at their Trunkline receipt meter. Mexican Exports increased 0.03 Bcf/d.

Total supply is up 0.76 Bcf/d and total demand is up 0.87 Bcf/d week over week. With the increase in demand higher than the increase in supply, expect EIA to report a weaker injection next week. The ICE Financial Weekly Index report is currently expecting an injection of 51 Bcf for next week. Last year’s injection for the same week was 65 Bcf, while the 5-year average is 60 Bcf.

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