Prices Steady as Injection Hits Market Expectation

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Natural gas storage inventories increased by 48 Bcf for the week ending Aug. 17, according to the EIA’s weekly report. This injection is slightly lower than the market expectation, which was an injection of 50 Bcf. The September 2018 contract was trading at $2.943 before the EIA report, slightly lower than yesterday’s close of $2.956. Since then, prices are slightly up, with the September 2018 contract trading at $2.952 at the time of writing.

Working gas storage inventories now sit at 2.435 Tcf, which is 684 Bcf below last year and 599 Bcf below the 5-year average.

With 11 weeks left in the injection season, DI is expecting this year’s injection season inventory to end at ~3.375 Tcf. Despite the record-low inventory level expected for Nov. 1, winter gas prices remain trading around $3/MMBtu, implying that the market anticipates production increases will be able to cover the storage deficit. Production has been setting record highs almost daily, and as summer heat dies down, DI expects injections to continue to grow along with production. However, certain regions – East, Midwest, and South Central – are not expected to reach their average 2010-2017 October inventories, but the market signals that those levels are enough to meet winter demand due to production gains.

Prices Steady as Injection Hits Market Expectation

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

Prices Steady as Injection Hits Market Expectation

This Week in Fundamentals

The summary below is based on PointLogic’s flow data and DI analysis for the week ending August 23, 2018.

Supply:

  • Dry gas production is up 0.34 Bcf/d week-over-week, with total dry production at 82.57 Bcf/d. Texas (+0.14 Bcf/d), the GoM (+0.13 Bcf/d), and the Rockies (+.10 Bcf/d) were the main drivers in the production increase for the week.
  • Canadian imports are down 0.46 Bcf/d week-over-week, bringing Canadian Imports to 4.95 Bcf/d.

Demand:

  • Domestic natural gas demand decreased 1.35 Bcf/d week-over-week, with the decrease attributable to power burn (-2.15 Bcf/d) with a slight offset in Res/Com (+0.66 Bcf/d). Total domestic demand decreased to 61.36 Bcf/d for the week.
  • LNG exports were down 0.43 Bcf/d week-over-week, while Mexican exports were flat.

Total supply is down 0.11 Bcf/d and total demand is down 1.93 Bcf/d week-over-week. With the decrease in demand outpacing the decrease in supply, expect EIA to report a higher injection next week. The ICE Financial Weekly Index report is currently expecting an injection of 65 Bcf for next week. Last year’s injection for the same week was 30 Bcf, while the 5-year average is 64 Bcf.

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