DI Blog

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Natural gas storage inventories increased by 63 Bcf for the week ending Aug. 30, according to the EIA’s weekly report. This injection is in line with market expectations of 64 Bcf. Before the EIA release, the October 2018 contract was trading at $2.778 per MMBtu, slightly lower than the October 2018 close yesterday of $2.795. At the time of writing, the October 2018 contract was trading slightly up at $2.782.

Working gas storage inventories now sit at 2.568 Tcf, which is 643 Bcf below last year and 590 Bcf below the 5-year average.

Despite the record-low storage inventory, prices remain deflated, with the average Winter 18/19 price trading at $2.908 as of close on Sept. 5. These low prices can be attributed to the confidence in production growth as US lower-48 natural gas production continues to reach record highs almost daily. Drillinginfo forecasts that the market will have roughly an additional 6 Bcf/d of gas during the upcoming Winter 18/19 compared to last winter. This production, along with the expected ~3.37 Tcf of storage, is expected to be a sufficient gas supply for this winter season.

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 PointLogic’s flow data and DI analysis for the week ending September 6, 2018.

Supply:

  • Dry gas production is up 0.08 Bcf/d week-over-week, with total dry production at 82.75 Bcf/d. There was a large uptick in Texas production (+0.32 Bcf/d), but that was offset by declines in the Gulf of Mexico (-0.39 Bcf/d). Tropical Storm Gordon caused producers to halt production for precautionary reasons in the Gulf – expect those volumes to return in the coming weeks.
  • Canadian Imports are down 0.48 Bcf/d week-over-week, bringing Canadian Imports to 4.96 Bcf/d.

Demand:

  • Domestic natural gas demand decreased 1.87 Bcf/d week-over-week, with the decrease attributable to power burn (-1.41Bcf/d). Total domestic demand decreased to 60.85 Bcf/d for the week.
  • LNG exports were down 0.11 Bcf/d week-over-week, while Mexican Exports were up 0.06 Bcf/d.

Total supply is down 0.39 Bcf/d, mostly due to Canadian Imports, and total demand is down 1.89 Bcf/d week-over-week. With the decrease in demand outpacing the decrease in supply, expect EIA to report a higher injection next week. The ICE Financial Weekly Index report is currently expecting an injection of 74 Bcf for next week. Last year’s injection for the same week was 91 Bcf, while the 5-year average is 77 Bcf.

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