Harvey’s Impact to Gas Storage Inventories – A Larger Injection Next Week

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Natural gas storage inventories increased by 30 Bcf for the week ended Aug. 25, per EIA. The build was in-line with most market expectations.

Working gas storage inventories increased to 3.155 Tcf, level 239 Bcf below last year and only 8 Bcf 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 3.72 Tcf and 3.88 Tcf.

Harvey’s Impact to Gas Storage Inventories – A Larger Injection Next Week

Downward Pressure on Prices Continue On Weak Demand

The prompt month contract (Oct 2017) opened down ahead of the storage report, but is up $0.02 to $2.96 per MMBtu, at time of writing. Prices around the Labor Day weekend are historically a weak period of the year as demand drops around the holiday weekend. This has been the case this week with forward prices reporting losses. Hurricane (now tropical storm) Harvey curtailed production in the Gulf of Mexico, but the impact to demand more than offset the supply losses and therefore put additional downward pressure to prices.

This Week In Fundamentals – Harvey makes the market long
The summary below is based on PointLogic’s flow data and DI analysis for the week ending 8/31.

• Supply: dry gas production is down 1.1 Bcf/d on average week-on-week with all the losses in the Gulf of Mexico and South Texas as Harvey made landfall in Texas last weekend. Some production has returned after hitting lows on Aug 27th, but remains lower than before Harvey. Imports from Canada are also down 380 MMcf/d this week for a total supply decline of 1.5 Bcf/d.

• Demand: mild temperatures largely due to Harvey in the Gulf pushed power demand down 5.8 Bcf/d. Exports to Mexico also declined 0.55 Bcf/d with additional smaller losses from other demand sectors. Total demand is down 7.4 Bcf/d week-on-week.

• Storage: the natural gas market is long this week with demand declines larger than those on the supply side. An injection in the 50-60 Bcf/d is expected to be released by EIA next week.

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