The EIA announced a 2 Bcf injection for the week ended March 31. The full range of forecasts ahead of the release was between a 14 Bcf withdrawal and a 15 Bcf injection, with an average of a 7 Bcf build. The report is bullish since the injection came in smaller than expected resulting in forward prices gaining 5 cents following the EIA release. The prompt contract (May2017) is trading at $3.31 per MMBtu, at time of writing.
Working gas storage inventories increased to 2.051 Tcf. Today’s report marks the end of the traditional withdrawal season (Nov-Mar). Inventories remain below last year and 5-year high levels by 427 Bcf. However, inventories are above the 5-year average by 265 Bcf.
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 3.5 Tcf and 4.2 Tcf by Nov 1.
April is the first month of the traditional injection season, which is also a shoulder month when not significant demand is expected as temperatures moderate from winter-like weather, but are also not high (hot) enough to cause significant power demand. Weak demand is expected over the next couple of weeks that will cause small injections into storage. On the supply side, production continues at levels 2 Bcf/d lower than last year and some recent declines are associated with maintenance season on the pipeline grid. This type of activity is expected to continue this month and will keep a lid on production gains in the very short term.
Longer-term and as explained in Monday’s Market Bulletin, production will need to rise this summer and that investment will only come with higher prices.
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