DI Blog

Insights across the energy value chain

Natural gas storage inventories increased 62 Bcf for the week ending July 12, according to the EIA’s weekly report. This is in line with the expected injection, which was 61 Bcf.

Working gas storage inventories now sit at 2.533 Tcf, which is 291 Bcf above inventories at the same time last year and 143 Bcf below the five-year average.

At the time of writing, the August 2019 contract was trading at $2.334/MMBtu, roughly $0.030 higher than yesterday’s close and ~$0.08 lower than last week.

Hurricane Barry caused the market to drop over 1.5 Bcf/d in supply week over week. This happened while Power demand was at its highest levels of the summer. These bullish factors drove prices up last week, but they could not hold, and prices started their decline early this week, falling to the $2.30 to $2.34 range. These declines have come as a result of weather forecast changes, as the last third of July temperature expectations have fallen and are now expected to be cooler. Expect prices to continue to trade on movements in the weather forecasts moving forward.

See the chart below for projections of the end-of-season storage inventories as of November 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 July 18, 2019.

Supply:

  • Dry gas production saw a decrease of 1.8 Bcf/d week over week. The South Central/Gulf region saw the largest move, decreasing 1.56 Bcf/d due to Hurricane Barry. The region is starting to recover and will do so in the coming weeks as crews resume work in the Gulf.
  • Canadian net imports declined slightly this week, down 0.1 Bcf/d.

Demand:

  • Domestic natural gas demand increased 2.68 Bcf/d week over week. Summer heat once again took demand upward, causing Power demand to increase 2.12 Bcf/d. Res/Com and Industrial demand also increased on the week by 0.37 Bcf/d and 0.19 Bcf/d, respectively.
  • LNG exports saw a slight drop during the week, falling 0.13 Bcf/d, while Mexican exports increased 0.05 Bcf/d.

Total supply is down 2.01 Bcf/d, while total demand increased 2.58 Bcf/d week over week. With Barry causing the drop in supply and summer heat creating stronger demand, expect the EIA to report a weaker injection next week. The ICE Financial Weekly Index report is currently expecting an injection of 35 Bcf. Last year, the same week saw an injection of 24 Bcf; the five-year average is an injection of 40 Bcf.

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