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Natural gas storage inventories increased 92 Bcf for the week ending April 19, according to the EIA’s weekly report. This injection is slightly above the market expectation, which was an inventory increase of 90 Bcf.

Working gas storage inventories now sit at 1.339 Tcf, which is 55 Bcf above inventories at the same time last year and 369 Bcf below the five-year average.

At the time of this writing, the May 2019 contract was trading at $2.450/MMBtu, $0.012 below yesterday’s close of $2.462/MMBtu.

Last week, prices broke below the three-year support of $2.522/MMBtu. Prices have remained below this area and have bounced around this week between $2.45 and $2.52. The main factors keeping prices suppressed are the mild weather, causing lower demand, and the supply increase year over year. The lack of demand is giving the market the chance to inject volumes throughout April, unlike last year. On top of weak demand, the lower 48 are producing ~9 Bcf/d more gas than this time last year.

Prices this summer will be mostly driven by weather. A warmer-than-normal summer will create less opportunity to inject gas into storage, potentially leaving EOS inventories below the five-year average and giving a bullish sentiment to the market. However, an average to below-average summer, in terms of temperatures, will allow more gas to be injected and will likely keep prices down.

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

Gas Injection Matches Last Weeks Record, Inventories Edge Closer to Five-Year Average

This Week in Fundamentals

The summary below is based on Bloomberg’s flow data and DI analysis for the week ending April 25, 2019.

Supply:

  • Dry gas production decreased 0.15 Bcf/d on the week. A majority of the decrease came from the South Central from declines in Oklahoma (-0.13 Bcf/d).
  • Canadian net imports decreased 0.30 Bcf/d on the week.

Demand:

  • Domestic natural gas demand decreased 4.11 Bcf/d week over week. Res/Com demand continues to decline with the change in season, having fallen 4.18 Bcf/d on the week. Power demand showed a gain of 0.44 Bcf/d, while Industrial demand fell 0.37 Bcf/d.
  • LNG exports increased 0.21 Bcf/d week over week, while Mexican exports remained relatively flat.

Total supply is down 0.45 Bcf/d, while total demand decreased 4.05 Bcf/d week over week. With the drop in demand outpacing the drop in supply, expect the EIA to report a stronger injection next week. The ICE Financial Weekly Index report is currently expecting an injection of 119 Bcf, another April injection record if the injection comes to fruition. Last year, the same week saw an injection of 62 Bcf; the five-year average is an injection of 71 Bcf.

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