Natural gas storage inventories increased 48 Bcf for the week ending Oct. 26, according to the EIA’s weekly report. This week’s injection is slightly below market expectations, which were 50 Bcf. The majority of the build comes from the Midwest and the South Central, which accounted for 45 of the 48 Bcf injection.
At the time of writing, the December 2018 contract was trading at $3.238/MMBtu, slightly below the December ’18 close yesterday of $3.261.
Working gas storage inventories now sit at 3.143 Tcf, which is 623 Bcf below last year and 638 Bcf below the 5-year average.
Summer has come to an end, and the first contract of winter has expired. During October ’18, the November ’18 contract traded in a range of $3.094/MMBtu and $3.32/MMBtu before ultimately settling earlier this week at $3.185/MMBtu. The December ’18 contract reached new highs during October, reaching as high as $3.369/MMBtu and averaging $3.26/MMBtu for the month of October.
November is here, and the winter season has begun. However, the injection season has not ended. Historically, it is common to see withdrawals starting in the early part of November. Currently, injections are still expected the next couple weeks due to mild weather forecasts and strong production levels.
See the chart below for projections of the end-of-season storage inventories as of Nov. 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 Nov. 1, 2018.
- Dry gas production increased 0.42 Bcf/d on the week, with Louisiana and Texas leading the production gains (+0.28 Bcf/d).
- Canadian Imports are down 0.74 Bcf/d week-over-week. This is mainly attributable to a Force Majeure being lifted on Rover, increasing flows to Vector. Vector increased deliveries to Canada by ~0.34 Bcf/d for the week.
- Domestic natural gas demand decreased 2.33 Bcf/d week-over-week. ResCom and Power decreased 1.7 Bcf/d and 0.29 Bcf/d, respectively. Industrial demand also decreased 0.33 Bcf/d.
- LNG exports were up 0.06 Bcf/d week-over-week. Mexican Exports also increased 0.02 Bcf/d.
Total supply is down 0.32 Bcf/d, and total demand is down 2.46 Bcf/d week-over-week. With the drop in demand outpacing the drop in supply, expect EIA to report a stronger injection next week. The ICE Financial Weekly Index report is currently expecting an injection of 63 Bcf for next week. Last year’s injection for the same week was 15 Bcf, while the 5-year average is 40 Bcf.