News Release

Prices Rally on Bullish Storage Release

byEnverus

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Natural gas storage inventories increased 55 Bcf for the week ending August 2, according to the EIA’s weekly report. This is below the market expectation, which was an injection of 61 Bcf.

Working gas storage inventories now sit at 2.689 Tcf, which is 343 Bcf above inventories from the same time last year and 111 Bcf below the five-year average.

At the time of writing, the September 2019 contract was trading at $2.133/MMBtu, roughly $0.050 higher than yesterday’s close and $0.069 lower than last week.

A week after the explosion on TETCO, the line remains down, with very minimal gas flowing from the Berne compressor in Ohio south to the Kosciusko compressor in Mississippi. However, the impact of the line shutdown was the opposite of that expected. It was expected that prices would be pressured upward, as the ~1.7 Bcf/d of gas that was flowing south on the line was stopped. That did not happen; instead, prices trended downward from $2.20 to $2.12 from August 1 to August 2. A bullish event in the explosion was offset by the bearish LNG planned maintenance at Sabine Pass and drops in deliveries to Corpus Christi. In total, LNG deliveries dropped ~2.2 Bcf/d from August 1 to August 7. Earlier in the year, Sabine Pass performed maintenance on trains 1 and 2, which took 2 to 3 weeks to complete. A similar timing is expected for trains 3 and 4. TETCO has announced that nominations south through the Danville compressor will not be accepted until at least August 12.

Looking ahead to the rest of the summer, it is unlikely that natural gas prices will gain traction. The bullish event of the explosion on TETCO couldn’t move prices higher, and with peak summer weather nearing an end, it is unlikely that prices will gain significantly on temperature increases in the forecasts.

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 August 8, 2019.

Supply:

  • Dry gas production saw an increase of 0.65 Bcf/d week over week. The South Central/Gulf region led the charge, gaining 0.40 Bcf/d, with multiple states and the gulf showing slight increases.
  • Canadian net imports increased this week, gaining 0.21 Bcf/d.

Demand:

  • Domestic natural gas demand increased 1.79 Bcf/d week over week. Power demand gained 1.81 Bcf/d, while Res/Com demand dropped 0.17 Bcf/d and Industrial demand increased 0.16 Bcf/d.
  • LNG exports decreased significantly week over week, falling 1.50 Bcf/d. This can be attributed to the planned maintenance on trains 3 and 4 at Sabine Pass. Mexican exports gained slightly, increasing 0.08 Bcf/d.

Total supply is up 0.86 Bcf/d, while total demand gained 0.47 Bcf/d week over week. With the maintenance at Sabine Pass taking away from demand for a couple of weeks and production getting back to full strength after Hurricane Barry, expect the EIA to report a stronger injection next week. The ICE Financial Weekly Index report is currently expecting an injection of 66 Bcf. Last year, the same week saw an injection of 33 Bcf; the five-year average is an injection of 48 Bcf.

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