Natural gas storage inventories increased 86 Bcf for the week ending Sep. 14, according to the EIA’s weekly report. This injection is roughly in line with market expectations, which were 85 Bcf. Before the EIA release, the October 2018 contract was trading at $2.905 per MMBtu, slightly lower than the October 2018 close yesterday of $2.908. After the EIA release and at the time of writing, the October 2018 contract was trading at $2.924, slightly higher than before the EIA release.
Working gas storage inventories now sit at 2.722 Tcf, which is 672 Bcf below last year and 586 Bcf below the 5-year average.
For the week of 9/10-9/14, prompt month prices traded in a range from $2.767/MMBtu to $2.829/MMBtu. Prices started the week at $2.804 and strengthened through most of the week, only to fall to the weekly low of $2.767 on Friday 9/14.
With only 7 weeks left in the injection season, the market is expecting inventories to end at ~3.3Tcf. One of the main questions being asked is, will this inventory be enough? Since Winter 10/11, withdrawals have averaged ~2.2Tcf for the winter season. Withdrawals from Winter 10/11 through Winter 17/18 have ranged from 1.5Tcf (Winter 11/12) to 3.0Tcf (Winter 13/14), depending on the severity of the winter. A winter like Winter 13/14 could cause complications in the natural gas market. However, the natural gas market has evolved since then, with production up nearly 16Bcf/d since 2013 and expected to continue to grow through Winter 18/19. These last 7 weeks of injection season will be important and will help determine what level of production will be sufficient for supply throughout the winter.
See the chart below for projections of the end-of-season storage inventories as of Nov. 1, the end of the injection season.
- Dry gas production is up 0.327 Bcf/d week-over-week, with total dry production averaging 83.775 Bcf/d. The primary increases in production came from Texas (+0.247 Bcf/d) and the GoM (+0.108 Bcf/d).
- Canadian Imports are up 0.40 Bcf/d week-over-week, bringing Canadian Imports to 4.96 Bcf/d.
- Domestic natural gas demand increased 3.91 Bcf/d week-over-week. This increase can mainly be attributed to the warmer temperatures, causing power burn (+5.51 Bcf/d) to increase. The increase in power burn came with a slight offset in ResCom (-1.32 Bcf/d). Total domestic demand increased to 63.84 Bcf/d for the week.
- LNG exports were down 0.34 Bcf/d week-over-week, while Mexican Exports were up 0.05 Bcf/d.
Total supply is up 0.73 Bcf/d, while total demand is up 4.06 Bcf/d week-over-week. With the increase in demand over supply, expect EIA to report a weaker injection next week. The ICE Financial Weekly Index report is currently expecting an injection of 56 Bcf for next week. Last year’s injection for the same week was 58 Bcf, while the 5-year average is 77 Bcf.
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