Natural gas storage inventories increased by 51 Bcf for the week ending July 6, according to the EIA’s weekly report. This injection is slightly lower than market expectations, which were expecting 53 Bcf. The August 2018 contract was trading at $2.82, marginally lower than yesterday’s close of $2.83. Since then, prices have taken a minor drop, with the August 2018 contract trading at $2.80 at the time of writing.
Working gas storage inventories now sit at 2.203 Tcf, which is 725 Bcf below last year and 519 Bcf below the 5-year average.
Looking ahead, there are 17 weeks left of this injection season. In order to reach last year’s inventory levels of 3.79 Tcf, we will need to have an average injection of 93.4 Bcf/week. With summer heat in full swing and power burn nearly 4 Bcf/d above the 5-year average, it is looking more and more unlikely inventory will reach that level despite recent gains seen in production growth. Drillinginfo expects inventories will end the season at 3.5 Tcf, a record low. To reach Drillinginfo’s inventory expectation of 3.5 Tcf, storage injections will need to average ~76 Bcf/week for the remainder of the injection season.
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 PointLogic’s flow data and DI analysis for the week ending July 12, 2018.
- Dry gas production is down 0.45 Bcf/d week-on-week, with the Rockies (-0.13 Bcf/d) and the Northeast (-0.12 Bcf/d) being the main drivers of this decrease.
- Canadian imports are down 0.34 Bcf/d week-on-week.
- Domestic natural gas demand decreased by 0.58 Bcf/d week-on-week, leaving total domestic demand at 62.57 Bcf/d for the week.
- LNG exports were down 0.18 Bcf/d week-on-week while Mexican exports were up 0.16 Bcf/d.
Total supply is down 0.78 Bcf/d and total demand is down 0.69 Bcf/d week-over-week. With supply down more than demand, expect a weaker injection next week. Last year’s injection for the same week was 27 Bcf while the 5-year average is 57 Bcf.