DI Blog

Insights across the energy value chain

Natural gas storage inventories increased by 66 Bcf for the week ending June 22, according to the EIA’s weekly report. This injection is lower than market expectations, however, a revision of 4 Bcf pushed the injection in line with expectations of a 70 Bcf injection. The August 2018 contract, which is trading as prompt for the first time today, was trading higher at $3.00 per MMBtu ahead of the storage report. Since then, the contract has dropped back below the $3.00 mark to $2.983, at time of writing.

Working gas storage inventories now sit at 2.074 Tcf, which is 735 Bcf below last year and 501 Bcf below the 5-year average.

Looking ahead, there are 18 weeks left of this injection season and if injections average 80 Bcf/week, inventories will end the season at 3.5 Tcf. This level compares to the previous low of 3.58 Tcf of 2012, which will likely put upward pressure on winter prices. This year, the injection season started late with the first injection reported during the last week of April and since, injections averaged 88 Bcf. However, as the peak summer months are ahead, unless production continues increasing over the summer, injections will likely become smaller during July and August and therefore increasing the likelihood of the end of the season inventory to the 3.5 Tcf level.

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 PointLogic’s flow data and DI analysis for the week ending June 28, 2018.

Supply:
– Dry gas production is up 0.57 Bcf/d week-on-week. This change can mostly be attributed to the Rockies (+ 0.3 Bcf/d) with gains in the DJ and the Green River basin.
– Canadian imports are down 0.16 Bcf/d week-on-week.

Demand:
– Domestic natural gas demand increased by 0.36 Bcf/d week-on-week led by the Res/Com sector.
– LNG exports were up 0.13 Bcf/d week-on-week while Mexican exports were relatively flat.

Total supply is up 0.42 Bcf/d and total demand is up 0.5 Bcf/d week-over-week. Since demand is outpacing supply this week, a smaller injection should be expected next week, but due to the revision reported in today’s report, the injection is expected to be in the mid-70s Bcf level. Last year’s injection for the same week was 62 Bcf while the 5-year average is 72 Bcf.

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