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Natural gas storage inventories increased by 46 Bcf for the week ending July 13, according to the EIA’s weekly report. This injection is much lower than market expectations, which were an injection of 54 Bcf. The August 2018 contract was trading at $2.72 before the EIA report, in-line with yesterday’s close of $2.72. Since then, prices have increased, with the August 2018 contract trading at $2.77 at the time of writing.

Working gas storage inventories now sit at 2.249 Tcf, which is 710 Bcf below last year and 535 Bcf below the 5-year average.

Looking ahead, there are 16 weeks left of this injection season. To reach last year’s inventory levels of 3.79 Tcf, we will need to have an average injection of 96.3 Bcf/week. With this level of inventory looking out of reach, Drillinginfo expects end-of-season inventory to come in at 3.5 Tcf.

Looking at inventory as of the end of June since 2010, the three main regions lagging are the East, Midwest, and South. These lower inventories can be attributed to the winter weather extending into late April 2018, as well as higher than normal power burn for the foregone portion of summer 2018. As the summer continues, weather will play a significant role in these regions reaching an acceptable level of inventory. Weather forecast reports anticipate the warm weather to settle for the remaining summer, which could prove significant to reaching comfortable inventory levels. For the remaining injection season, it will be worth keeping an eye on the East, Midwest, and South regions to see how their respective inventory levels play out.

Injection Lower Than Expected, Prices Rise on EIA Release

See the chart below for projections of the end-of-season storage inventories as of November 1, the end of the injection season.

Injection Lower Than Expected, Prices Rise on EIA Release

This Week in Fundamentals

The summary below is based on PointLogic’s flow data and DI analysis for the week ending July 19, 2018

Supply:

  • Dry gas production is down 0.58 Bcf/d week-on-week, with total dry production at 80.30 Bcf/d. Texas (-0.32 Bcf/d) and the Southeast (-0.16 Bcf/d) cause a majority of the decrease.
  • Canadian imports are up 0.05 Bcf/d week-on-week.

Demand:

  • Domestic natural gas demand increased by 2.11 Bcf/d week-on-week, with the increase in power burn (+2.56 Bcf/d) being the main driver. This increase has total domestic demand at 65.27 Bcf/d for the week.
  • LNG exports were up 0.17 Bcf/d week-on-week while Mexican exports were down 0.16 Bcf/d.

Total supply is down 0.52 Bcf/d and total demand is up 2.36 Bcf/d week-over-week. With demand outpacing supply, expect EIA to report a lower injection next week. Last year’s injection for the same week was 17 Bcf while the 5-year average is 43 Bcf.

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