DI Blog

Insights across the energy value chain

Natural gas storage inventories increased 100 Bcf for the week ending May 17, according to the EIA’s weekly report. This injection is slightly below the market expectation, which was an inventory increase of 102 Bcf.

Thus far in 2019, lower-48 dry natural gas production is ~7.03 Bcf/d higher and Canadian net imports are 0.68 Bcf/d lower than the same period in 2018. Natural gas demand is up ~4.72 Bcf/d for the same period, with LNG exports accounting for 1.54 Bcf/d of that increase. Since injections started this season as of week ending March 29, 2019, total inventories have increased 646 Bcf. In 2018 for the same time frame, storage showed an injection of 246 Bcf.

Working gas storage inventories now sit at 1.753 Tcf, which is 137 Bcf above inventories at the same time last year and 274 Bcf below the five-year average.

At the time of this writing, the June 2019 contract was trading at $2.557/MMBtu, $0.014 above yesterday’s close of $2.543/MMBtu.

The production drop in West Virginia (described below) caused prices to hit the high for the week on Monday, at $2.673/MMBtu. Since the issue at the Salem Plant has been resolved, prices have reacted by dropping into the mid $2.50s. Events like these will have only a temporary impact on the market, as we saw with this event, unless the outage is expected to be long-term.

The summer weather forecast during the late winter season and early summer season showed an expectation of mild temperatures, calling for average to below-average power demand. However, forecasts have adjusted and now have a warmer expectation, creating anticipation for greater power demand.

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 May 23, 2019.

Supply:

  • Dry gas production decreased 0.38 Bcf/d. The decrease is mainly due to falling production in the East region (-0.51 Bcf/d), specifically in West Virginia (-0.62 Bcf/d). TCO issued an operational alert at the Markwest Salem Plant, causing significantly reduced deliveries into the system on May 19. This issue caused West Virginia production to fall by ~2 Bcf/d to start the week. Production rebounded by midweek and is now back to normal levels.
  • Canadian net imports increased 0.22 Bcf/d on the week.

Demand:

  • Domestic natural gas demand decreased 0.35 Bcf/d week over week. Res/Com demand led the decline, falling 2.09 Bcf/d, but was offset by Power demand, which gained 2.22 Bcf/d. Industrial demand aided the decline, falling 0.46 Bcf/d week over week.
  • LNG exports decreased 0.24 Bcf/d week over week, while Mexican exports increased 0.03 Bcf/d.

Total supply is down 0.16 Bcf/d, while total demand decreased 0.57 Bcf/d week over week. With the decrease in demand outpacing the decrease in supply, expect the EIA to report a stronger injection next week. The ICE Financial Weekly Index report is currently expecting an injection of 102 Bcf. Last year, the same week saw an injection of 96 Bcf; the five-year average is an injection of 101 Bcf.

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