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Natural gas storage inventories increased 104 Bcf for the week ending October 11, according to the EIA’s weekly report. This is slightly lower than the market expectation, which was an injection of 108 Bcf. The injection this week ties 2019 with 2014 for the most 100+ Bcf injections, at ten.

Working gas storage inventories now sit at 3.519 Tcf, which is 494 Bcf above inventories from the same time last year and 14 Bcf above the five-year average.

Prior to the storage report release, the November 2019 contract was trading at $2.346/MMBtu, roughly $0.043 higher than yesterday’s close. Those gains held post-report, and at the time of writing, the November 2019 contract was trading at $2.346/MMBtu.

Market Commentary

The Cove Point LNG terminal restarted exports earlier this week after a roughly three-week maintenance period. Before the maintenance period, Cove Point was taking north of 0.7 Bcf/d into the facility. However, during the maintenance, flows to the terminal fell to zero and forced gas elsewhere into the market. This caused excess supply in the Northeast during an already low-demand period, which caused regional prices to decrease. With maintenance ending on Monday, flows to Cove Point have returned to normal. This has brought relief to regional prices, as Dominion South has seen basis increase ~$0.59/MMBtu from Sunday to Wednesday this week.

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 October 17, 2019.

Supply:

  • Dry production increased 0.41 Bcf/d on the week. Most of the increase came from the East (+0.25 Bcf/d), with small gains in all other regions.
  • Canadian imports remained relatively flat week-over-week, gaining 0.02 Bcf/d.

Demand:

  • Domestic natural gas demand increased 2.18 Bcf/d week over week. Res/Com demand accounted for most of the increase, rising 4.03 Bcf/d. Industrial demand also increased 0.46 Bcf/d, while Power demand decreased 2.31 Bcf/d.
  • LNG exports increased 0.35 Bcf/d, while Mexican exports decreased 0.09 Bcf/d.

Total supply increased 0.43 Bcf/d, while total demand increased 2.53 Bcf/d week over week. With the demand increase outpacing the supply increase, expect the EIA to report a weaker injection next week. The ICE Financial Weekly Index report is currently expecting an injection of 91 Bcf. Last year, the same week saw an injection of 58 Bcf; the five-year average is an injection of 71 Bcf.

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