Natural gas storage inventories increased 46 Bcf for the week ending Sept. 21, according to the EIA’s weekly report. This injection is lower than market expectations, which were 52 Bcf. Yesterday, the October 2018 contract expired at $3.021 per MMBtu. Before the EIA report was released this morning, the November contract was trading at $3.013 per MMBtu, slightly higher than the November 2018 close yesterday of $2.980. After the EIA release and at the time of writing, the November 2018 contract was trading at $3.058, roughly $0.045 higher than before the EIA release and $0.078 higher than yesterday’s close.
Working gas storage inventories now sit at 2.768 Tcf, which is 690 Bcf below last year and 621 Bcf below the 5-year average.
For the week of 9/17-9/21, prompt month prices traded in a range from $2.814/MMBtu to $2.977/MMBtu. Prices started the week at the bottom of the range, $2.814, and strengthened throughout the week, closing Friday at $2.977.
Winter is quickly approaching, and the severity of the winter will play a significant role on where inventories start next injection season. The DI base case, which uses DI supply and demand forecasts, projects starting inventory for the 2019 injection season at 1.36 Tcf. This level is roughly in line with where the 2018 injection season started. However, if this winter contains severe weather like Winter 13/14, starting 2019 injection season inventories could be as low as 0.63 Tcf, a record low. A mild winter, like Winter 11/12, would leave inventories at 2.12 Tcf come April ’19. Using the 5-year average draw rate, April ’19 inventories would start at 1.11 Tcf. The severity of the weather this winter will not only determine where we start next injection season but will also play a large role on the volatility of prices.
See the chart below for projections of the end-of-season storage inventories as of Nov. 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 September 27, 2018.
- Dry gas production is up 0.43 Bcf/d week-over-week, with total dry production averaging 84.35 Bcf/d, yet another weekly average record. The primary increases are the GoM (+0.23 Bcf/d) and the Northeast (+0.13 Bcf/d). The GoM increases are nearly back to the levels they were before Tropical Storm Gordon.
- Canadian Imports are down 0.10 Bcf/d week-over-week, bringing Canadian Imports to 4.81 Bcf/d.
- Domestic natural gas demand decreased 3.00 Bcf/d week-over-week. This decrease can be attributed to cooler weather, causing a decrease in power burn demand (-5.83 Bcf/d). The decrease in power burn came with a slight offset in ResCom (+2.40 Bcf/d). Total domestic demand decreased to 60.71 Bcf/d for the week.
- LNG exports were down 0.13 Bcf/d week-over-week, while Mexican Exports were down 0.09 Bcf/d.
Total supply is up 0.33 Bcf/d, while total demand is down 3.54 Bcf/d week-over-week. With the decrease in demand and the increase in supply, expect EIA to report a stronger injection next week. The ICE Financial Weekly Index report is currently expecting an injection of 88 Bcf for next week. Last year’s injection for the same week was 42 Bcf, while the 5-year average is 86 Bcf.