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Gas Prices Retain Weekly Gains Following EIA Report


Natural gas storage inventories increased by 57 Bcf for the week ended July 7, per EIA. The report is bullish with the build coming below market expectations, which were calling for a 60-Bcf increase in stocks. The full range of forecasts was between 43 Bcf and 65 Bcf.
Natural gas prices have been trading on a bullish note this week with daily gains and reaching levels above the $3.00 mark. The prompt month contract (Aug17) is currently trading at $2.991, basically unchanged following the EIA report. Week-on-week, the contract has gained 9 cents and maintained the gains after the storage release.

Working gas storage inventories increased to 2.945 Tcf, level 289 Bcf below last year but 172 above the 5-year average. See Drillinginfo EIA’s chart below. This graphic shows projections for end-of-season inventories as of Nov 1. Two scenarios are included for summer injections (April-Oct) that result in inventories between 3.6 Tcf and 4.1 Tcf.

Summer Has Arrived, Power Demand on the Rise
The summary below is based on PointLogic’s flow data and DI analysis for the week ending July 13.

Supply: after averaging 72.3 Bcf/d last week, US dry gas production is down 0.6 Bcf/d this week to 71.7 Bcf/d. Overall, the trend continues to be up for production, but gains have constant setbacks as supposed to consistent gains.

Demand: demand for power led total demand gains week-on-week. Warmer temperatures resulted in a 2.3 Bcf/d weekly increase in power burn while the remaining demand components remained basically flat. Total demand increased by 2.9 Bcf/d.

Drillinginfo continues to expect an increase in production this year, heavily loaded in 4Q2017 as pipeline takeaway capacity becomes available. Main projects on track to be completed are TETCO Gulf Market Expansion Phase II, Columbia Gas Leach Xpress/Columbia Gulf Rayne Express and Transco Atlantic Sunrise. Energy Transfer’s Rover is the big question right now as some construction work is being completed, but has pending violations that could potentially delay the start date or the size of the capacity available this year. This would put upward pressure on prices particularly as we start the high demand season (winter).

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