DI Blog

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Natural gas storage inventories increased 115 Bcf for the week ending June 14, according to the EIA’s weekly report. This injection is well above the market expectation, which was an inventory increase of 104 Bcf.

Working gas storage inventories now sit at 2.203 Tcf, which is 209 Bcf above inventories at the same time last year and 199 Bcf below the five-year average.

At the time of writing, the July 2019 contract was trading at $2.200/MMBtu, dropping $0.076 from yesterday’s close. Prices were up around ~$0.02/MMBtu before the report release, but the bearish release caused prices to quickly fall.

For the sixth consecutive week, the EIA has reported a triple-digit injection. This is the first time this has happened since 2014, when there were seven consecutive weeks of triple-digit injections. With the summer’s peak demand season just around the corner, don’t expect the triple-digit injections to hang around much longer. As power burn ramps up in July and August, some of the gas that is currently being injected into storage will need to be used to meet power burn demand. ICE’s Financial Weekly Index report is currently expecting an injection below 100 Bcf for next week.

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 June 20, 2019.

Supply:

  • Dry gas production saw an increase of 0.23 Bcf/d. The largest move was in the East region, which showed a 0.22 Bcf/d gain in production. Within the East region, nearly all of the change came from Ohio (+0.20 Bcf/d).
  • Canadian net imports decreased 0.67 Bcf/d. This decrease is mainly due to the complete shutdown of the Alliance pipeline system. This shutdown is for repairs to the pipeline in Iowa and Illinois, and the pipeline is expected to come back online over the weekend.

Demand:

  • Domestic natural gas demand increased 0.51 Bcf/d week over week. Power demand was the driver of the change, gaining 0.74 Bcf/d on the week. This was slightly offset by both Res/Com and Industrial demand, which fell 0.21 Bcf/d and 0.01 Bcf/d, respectively.
  • LNG exports showed an increase of 0.31 Bcf/d on the week, while Mexican exports increased 0.09 Bcf/d.

Total supply is down 0.44 Bcf/d, while total demand increased 0.93 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 95 Bcf. Last year, the same week saw an injection of 66 Bcf; the five-year average is an injection of 66 Bcf.

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