Gas Storage Build In-Line with Expectations

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Natural gas storage inventories increased by 43 Bcf for the week ended Aug. 18, per EIA. The build was in-line with market expectations. The prompt month contract (Sept 2017) opened $0.03 higher this morning and gains are being held following the EIA report. Contract is trading at $2.964 per MMBtu at time of writing. Today’s gains in prices are likely due to uncertainty by Hurricane Harvey, which is expected to hit the Gulf of Mexico this weekend as well as consistent gains in demand over the past 2 weeks while production has declined in the same period.

Storage Inventories in the East and Pacific Regions Already Under the 5-Year Average

Working gas storage inventories increased to 3.125 Tcf, level 223 Bcf below last year but 45 Bcf above the 5-year average.
On a regional basis, all regions are below 2016 levels. However, not all regions are above the 5-year average. The Pacific and East regions are already below the 5-year average. The East is only 9 Bcf or 1% below the 5-year average, which is basically in-line with the historical average. Aliso Canyon is driving the gap in the Pacific region due to the 2015 leak in the storage facility that it’s still being worked on with registrations to refill gas into the facility.

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 3.7 Tcf and 3.9 Tcf.

Gas Storage Build In-Line with Expectations

This Week In Fundamentals
The summary below is based on PointLogic’s flow data and DI analysis for the week ending 8/17.

• Supply: dry gas production decreased again this week, down 0.2 Bcf/d this week to 72.7 Bcf/d after peaking during the week of Aug 11 at 73.2 Bcf/d. The losses were in the Northeast and Gulf of Mexico. Total supply is up 200 MMc/d with Canadian imports gaining 0.4 Bcf/d.

• Demand: warmer temperatures continue to push demand higher. Power demand increased by 1.1 Bcf/d week-on-week. Total demand is up 1.8 Bcf/d this week due to additional gains from the Residential and Commercial sector. Mexican exports also increased by 120 MMcf/d this week while LNG exports were unchanged at 1.8 Bcf/d.

• Storage: the natural gas market is shorter than last week with demand increases larger than production gains. An injection 5-10 Bcf/d lower than today’s 43 Bcf/d is expected to be released by EIA next week.

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