Recovery After the Storm

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Natural gas storage inventories increased by 46 Bcf for the week ended June 23, per EIA. The report is bullish with the build coming below market expectations, which were calling for a 52-Bcf increase in stocks. The full range of forecasts was between 40 Bcf and 60 Bcf.

Gas Prices Return to $3.00 Levels

Following a month of price weakness including losses every Monday when the market opened, the July contract expired yesterday at $3.07 per MMBtu after gaining 20 cents over the past week.
On its first day as prompt contract, price for Henry Hub Aug17 is up $0.01 following the EIA report and trading at $3.11 at time of writing.

End-Of-Season Inventory Expected at 3.7 Tcf

Working gas storage inventories increased to 2.816 Tcf, level 319 Bcf below last year but 181 above the 5-year average. See Drillinginfo EIA’s chart below. 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 3.64 Tcf and 4.10 Tcf.

Due to lack of production growth in 2017, DI expects storage inventories will end the refill season (Oct 31st) on the low end at 3.7 Tcf. This level is lower than 2017 and also lower than the 5-year average.

Recovery After the Storm

This Week on Fundamentals

• Supply: dry gas production recovered from the lows seen last week (when Tropical Storm Cindy impacted production in the Gulf) increasing by 0.4 Bcf/d week-on-week to 71.7 Bcf/d. June marks the first month of the year when production levels are higher than 2016, 71.6 Bcf/d (2017) vs 71.3 Bcf/d (2016). However, year-to-date production remains down by 1.5 Bcf/d.

• Demand: total gas demand in the US decreased by 0.4 Bcf/d week-on-week lead by cooling temperatures that caused power burn to drop by 1.7 Bcf/d, but also led gains in Res/Com of 0.8 Bcf/d. Exports to MX also compensated some of the losses from the power sector with a gain of 0.4 Bcf/d as exports reached record high levels this week averaging 4.4 Bcf/d.

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