DI Blog

Insights across the energy value chain

Natural gas storage inventories increased 65 Bcf for the week ending Nov. 2, according to the EIA’s weekly report. This week’s injection is above market expectations, which were 59 Bcf. The majority of this week’s build again comes from the Midwest and the South Central, which accounted for 54 Bcf of the 65 Bcf injection.

At the time of writing, the December 2018 contract was trading at $3.532/MMBtu, slightly below the December ‘18 close yesterday of $3.555.

Working gas storage inventories now sit at 3.208 Tcf, which is 580 Bcf below last year and 621 Bcf below the 5-year average.

So far during November, the December ’18 contract has traded in a range of $3.237/MMBtu and $3.567/MMBtu. Prices soared this week, with the December ’18 contract closing at the November high of $3.567/MMBtu on Monday, a jump of ~$0.28/MMBtu from the close on Nov. 2. The drastic increase in prices resulted from the past weekend’s change in the weather forecast, where the temperature outlook changed from mild to cold across the Midwest and Northeast. The weather forecast change has produced what is expected to be the first draw of the season for the week ending Nov. 16, currently expected to be 72 Bcf, according to the ICE Financial Weekly Index report.

See the chart below for projections of the end-of-season storage inventories as of Nov. 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 Nov. 8, 2018

Supply:

  • Dry gas production decreased 0.62 Bcf/d on the week. A majority of the decrease can be attributed to production decreases in the South Central Region (-0.33 Bcf/d), mainly Louisiana (-0.29 Bcf/d). Other contributors to the decrease were the Mountain Region (-0.16 Bcf/d) and the Northeast (-0.14 Bcf/d).
  • Canadian Imports decreased 0.15 Bcf/d for the week.

Demand:

  • Domestic natural gas demand increased 1.51 Bcf/d week-over-week. ResCom increased 2.84 Bcf/d, while Power demand decreased 1.58 Bcf/d. Industrial demand increased 0.25 Bcf/d.
  • LNG exports decreased 0.04 Bcf/d week-over-week. Mexican Exports also decreased 0.02 Bcf/d.

Total supply is down 0.77 Bcf/d, and total demand is up 1.26 Bcf/d week-over-week. With the increase in demand and the decrease in supply, expect EIA to report a weaker injection next week. The ICE Financial Weekly Index report is currently expecting an injection of 38 Bcf for next week. Last year for the same week was a draw of 18 Bcf, while the 5-year average is an injection of 6 Bcf.

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