Injection Meets Market Expectation, Prices Steady

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byEnverus

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Natural gas storage inventories increased 87 Bcf for the week ending October 18, according to the EIA’s weekly report. This is slightly lower than the market expectation, which was an injection of 88 Bcf.

Working gas storage inventories now sit at 3.606 Tcf, which is 519 Bcf above inventories from the same time last year and 28 Bcf above the five-year average.

Prior to the storage report release, the November 2019 contract was trading at $2.296/MMBtu, roughly $0.014 higher than yesterday’s close. At the time of writing, post-report, the November 2019 contract was trading at $2.286/MMBtu.

During October, day-ahead Henry Hub prices have traded in a range of $2.214 to $2.352. Last year during October, day-ahead Henry Hub prices averaged $3.21 for the month. The main difference between this year and last is the market has storage levels sitting over 0.5 Tcf higher than 2018. Storage levels also topped the five-year average last week for the first time since September 2017. These storage levels, in addition to record production, have the market comfortable heading into the winter season. The current November weather forecast shows some cold spikes, but prices will likely have trouble gathering strength. Outside the cold shots, the forecast currently shows average to warmer temperatures.

See the chart below for projections of the end-of-season storage inventories as of April 1, the end of the withdrawal season.

This Week in Fundamentals
The summary below is based on Bloomberg’s flow data and DI analysis for the week ending October 24, 2019.

Supply:

  • Dry production increased 0.93 Bcf/d on the week. Most of the increase came from the South Central (+0.44 Bcf/d), the Mountain region (+0.28) and the East (+0.19 Bcf/d), with small gains in the Midwest and the Pacific.
  • Canadian imports decreased 0.18 Bcf/d.

Demand:

  • Domestic natural gas demand increased 0.35 Bcf/d week over week. Power demand accounted for most of the increase, rising 0.22 Bcf/d. Res/Com demand also increased 0.17 Bcf/d, while Industrial demand decreased 0.04 Bcf/d.
  • LNG exports increased 0.59 Bcf/d due to Cove Point’s resumed operations, while Mexican exports decreased 0.15 Bcf/d.

Total supply increased 0.75 Bcf/d, while total demand increased 0.85 Bcf/d week over week. The ICE Financial Weekly Index report is currently expecting an injection of 94 Bcf. Last year, the same week saw an injection of 48 Bcf; the five-year average is an injection of 52 Bcf.

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