Natural gas storage inventories increased 81 Bcf for the week ending Oct. 12, according to the EIA’s weekly report. This week’s injection is slightly below the market’s expectation, which was 83 Bcf. On a regional level, the Mountain region reported its first withdrawal of the season of 3 Bcf. Historically, the first withdrawal for the Mountain region occurs during the month of November. At the time of writing, the November 2018 contract was trading at $3.230/MMBtu, significantly lower than the November ‘18 close yesterday of $3.320/MMBtu, however, a majority of the price drop occurred before the EIA release.
Working gas storage inventories now sit at 3.037 Tcf, which is 601 Bcf below last year and 605 Bcf below the 5-year average.
For the week of Oct. 8-Oct.12, November 2018 prices traded in a range from $3.161/MMBtu to $3.284/MMBtu. Prices started the week strong and fell later in the week. After the storage report was released last Thursday, prices started to weaken, and they continued to fall into Friday, closing the week at the weekly low of $3.161. So far this week, 10/15-10/17, prices have traded in a slightly higher range, with closing prices for the November ’18 contract between $3.239/MMBtu and $3.320/MMBtu.
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 Bloomberg’s flow data and DI analysis for the week ending Oct. 18, 2018.
- Dry gas production decreased 0.40 Bcf/d on the week, with Texas (-0.26 Bcf/d) causing most of the drop. The expectation that GoM production would bounce back after Hurricane Michael is starting to come to fruition, as GoM production increased ~0.16 Bcf/d week-on-week.
- Canadian Imports are down 0.22 Bcf/d week-over-week.
- Domestic natural gas demand increased 3.74 Bcf/d week-over-week due to heating demand. ResCom increased 8.02 Bcf/d with an offset in Power, with Power demand down 5.36 Bcf/d.
- LNG exports were up 0.69 Bcf/d week-over-week due to Cove Point Maintenance coming to an end. Mexican Exports increased 0.1 Bcf/d.
Total supply is down 0.57 Bcf/d and total demand is up 4.63 Bcf/d week-over-week. With the decrease in supply and the increase in demand, expect EIA to report a weaker injection next week. The ICE Financial Weekly Index report is currently expecting an injection of 51 Bcf for next week. Last year’s injection for the same week was 65 Bcf, while the 5-year average is 76 Bcf.
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