Gas Prices Decline on Bearish EIA Storage Report


Natural gas storage inventories increased 114 Bcf for the week ending May 24, according to the EIA’s weekly report. This injection is significantly above the market expectation, which was an inventory increase of 98 Bcf.

Thus far in 2019, lower-48 dry natural gas production is ~7.02 Bcf/d higher and Canadian net imports are 0.71 Bcf/d lower than the same period in 2018. Natural gas demand is up ~4.70 Bcf/d for the same period, with LNG exports accounting for 1.60 Bcf/d of that increase. Since injections started this season as of week ending March 29, 2019, total inventories have increased 760 Bcf. In 2018 during the same time frame, storage injections totaled 342 Bcf.

Working gas storage inventories now sit at 1.867 Tcf, which is 156 Bcf above inventories at the same time last year and 257 Bcf below the five-year average.

The June 2019 contract expired yesterday at $2.633/MMBtu. The contract saw the usual rally during expiration, gaining $0.051 before the close yesterday. At the time of writing, the July 2019 contract was trading at $2.555/MMBtu, down $0.069 following the bearish storage report.

Natural gas supply rebounded this week in West Virginia, gaining 0.49 Bcf/d, after the disruption early last week that caused production to decline ~2 Bcf. However, gains in production were not enough to offset the gains in supply. Power demand started to show seasonality this week, gaining over 2 Bcf/d. As peak summer continues to edge closer, expect power burn to continue to climb as temperatures heat up.

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

Gas Prices Decline on Bearish EIA Storage Report

This Week in Fundamentals
The summary below is based on Bloomberg’s flow data and DI analysis for the week ending May 30, 2019.

• Dry gas production increased 0.79 Bcf/d. The East region fully rebounded from the supply disruption last week in West Virginia with the total region gaining 0.78 Bcf/d and West Virginia accounting for 0.49 Bcf/d of that increase. The Mountain region also contributed to the supply gains, attributing an additional 0.29 Bcf/d. These gains were slightly offset by the South Central/Gulf region, which saw a drop of 0.28 Bcf/d, mainly coming from Oklahoma (-0.35 Bcf/d).
• Canadian net imports were relatively flat, down 0.08 Bcf/d on the week.
• Domestic natural gas demand increased 0.56 Bcf/d week over week. Power burn led the increase as we head into the cooling season, increasing 2.80 Bcf/d. Res/Com demand fell off 2.1 Bcf/d, while industrial demand declined 0.20 Bcf/d.
• LNG exports increased 0.20 Bcf/d week over week, while Mexican exports increased 0.07 Bcf/d.

Total supply is up 0.70 Bcf/d, while total demand increased 0.83 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 110 Bcf. Last year, the same week saw an injection of 92 Bcf; the five-year average is an injection of 99 Bcf

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