DI Blog

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Natural gas storage inventories increased 81 Bcf for the week ending July 5, according to the EIA’s weekly report. This is in line with the expected injection, which was 80 Bcf.

Working gas storage inventories now sit at 2.471 Tcf, which is 275 Bcf above inventories at the same time last year and 142 Bcf below the five-year average.

At the time of writing, the August 2019 contract was trading at $2.466 MMBtu, roughly $0.022 higher than yesterday’s close and $0.20 higher than last week.

Natural gas prices have been gaining traction over the past couple of weeks as weather forecasts have started to show warming temperatures across the lower-48. Prices rallied during expiration of the July contract, as expiration typically does, but then took a downturn to start the month, dropping as low as $2.24/MMBtu. However, the above-average weather forecasts have garnered support for prices, and prices are now trading in the $2.45 to $2.50 range as power demand is expected to increase. Tropical Storm Barry is now expected to become Hurricane Barry by tomorrow and could have a bearish impact on prices during the next couple of days should LNG terminals are shut in, leaving an over-supplied market. The storm will also likely decrease power burn for southern states (Texas and Louisiana) adding additional bearish sentiment to the market in the very short term.
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 July 10, 2019.

Supply:
Dry gas production saw a decrease of 0.7 Bcf/d. The South Central region saw the largest move, decreasing by 0.47 Bcf/d as production is being shut down ahead of the tropical storm in the Gulf.
Canadian net imports also decline this week, down 0.1 Bcf/d.

Demand:
Domestic natural gas demand increased 1.1 Bcf/d week over week. Power demand accounted for nearly all the domestic demand increase again this week, gaining 1.4 Bcf/d as temperatures started heating up. Res/Com demand decreased slightly, losing 0.15 Bcf/d, and Industrial demand fell 0.1 Bcf/d.
LNG exports were flat week on week, while Mexican exports gained 0.18 Bcf/d.
Total supply is down 0.7 Bcf/d, while total demand increased 1.3 Bcf/d week over week. With the increase in demand and the decrease in supply, expect the EIA to report a weaker injection next week. The ICE Financial Weekly Index report is currently expecting an injection of 65 Bcf. Last year, the same week saw an injection of 51 Bcf; the five-year average is an injection of 73 Bcf.

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