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Natural gas storage inventories increased 112 Bcf for the week ending September 27, according to the EIA’s weekly report. This is higher than the market expectation, which was an injection of 110 Bcf.

Working gas storage inventories now sit at 3.317 Tcf, which is 465 Bcf above inventories from the same time last year and 18 Bcf below the five-year average.

Prior to the storage report release, the November 2019 contract was trading at $2.233/MMBtu, roughly $0.014 lower than yesterday’s close. At the time of writing, post-report, the November 2019 contract was trading at $2.265/MMBtu.

Heading into the shoulder season, temperatures are more mild than peak summer temperatures, causing reduced cooling demand. Temperatures are also expected to be warmer than normal throughout October, causing less heating demand. With production at an all-time high coupled with the lack of demand, the market has an opportunity to put gas into storage for the winter. In 2019, the market has already seen nine injections top 100 Bcf, and with two more, 2019 would break the record of 100+ Bcf injections set in 2014. Storage inventories now sit just below the five-year average and will likely exceed that level in the coming weeks.

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

This Week in Fundamentals

The summary below is based on Bloomberg’s flow data and DI analysis for the week ending October 3, 2019.

Supply:

  • Dry production increased 0.43 Bcf/d on the week. Most of the increase came from the South Central (+0.37 Bcf/d) and the East (+0.30 Bcf/d), with a slight offset coming from the Mountain region (-0.24 Bcf/d).
  • Canadian imports increased 0.23 Bcf/d on the week.

Demand:

  • Domestic natural gas demand increased 2.27 Bcf/d week over week. Res/Com demand accounted for most of the increase, rising 1.45 Bcf/d. Power demand increased 0.69 Bcf/d, while Industrial demand increased 0.13 Bcf/d.
  • LNG exports increased 0.03 Bcf/d, while Mexican exports increased 0.07 Bcf/d.

Total supply increased 0.66 Bcf/d while total demand increased 2.46 Bcf/d week over week. With the increase in demand outpacing the increase in supply, expect the EIA to report a weaker injection next week. The ICE Financial Weekly Index report is currently expecting an injection of 108 Bcf. Last year, the same week saw an injection of 98 Bcf; the five-year average is an injection of 86 Bcf.

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