Natural Gas Injection Higher Than Expected

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The EIA announced a 74 Bcf injection for the week ended April 21. The full range of forecasts ahead of the release was between a 62 Bcf and a 91 Bcf injection, with an average of a 72 Bcf build. The report is bearish again this week as the injection came in higher than most expectations. Prices are also down 1-2 cents following the release. The prompt contract (June2017) is trading at $3.25 per MMBtu, at time of writing.

Storage Inventories continue above the 5-year average

Working gas storage inventories increased to 2.189 Tcf. Inventories remain below last year and 5-year high levels by 358 Bcf. However, inventories are above the 5-year average by 299 Bcf.

See Drillinginfo EIA’s chart attached. 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 3.6 Tcf and 4.3 Tcf.

Natural Gas Injection Higher Than Expected

Natural Gas Fundamentals

  • Supply: Natural gas production is down 90 MMcf/d week-on-week and remains at levels below 70 Bcf/d and over 2 Bcf/d below 2016 levels.
  • Demand: total demand increased by 2.1 Bcf/d lead by the residential/commercial sector and Mexican exports.
  • Storage: expect a smaller injection next week as demand increased, while supply remained flat. Early estimates foresee an injection in the 55-65 Bcf range, which compares to a 68 Bcf build last year.
  • Prices are expected to continue trading rangebound until more summer-like temperatures materialize pushing demand higher. Drillinginfo continues to call for prices to rise in order to facilitate production to climb back above 72 Bcf/d. This level of production is necessary for storage to start next winter at or above 3.6 Tcf.

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