Triple-Digit Gas Injection Meets Market Expectation

Triple-Digit Gas Injection Meets Market Expectation

Natural gas storage inventories increased 106 Bcf for the week ending May 10, according to the EIA’s weekly report. This injection meets the market expectation, which was an inventory increase of 105 Bcf.

Thus far in 2019, lower-48 dry natural gas production is ~7.03 Bcf/d higher than the same period in 2018, while natural gas demand is up ~4.66 Bcf/d for the same period. Since injections started this season for the week ending March 29, 2019, total inventories have increased 546 Bcf. In 2018 for the same time frame, storage showed an injection of 155 Bcf.

Working gas storage inventories now sit at 1.653 Tcf, which is 130 Bcf above inventories at the same time last year and 286 Bcf below the five-year average.

At the time of this writing, the June 2019 contract was trading at $2.623/MMBtu, $0.022 above yesterday’s close of $2.601/MMBtu.

Prices traded in a narrow range this week for the June 2019 contract, trading between $2.601 and $2.659. The main driver of the price movement has been weather. Forecast changes will continue to be the main price driver as we get deeper into the summer and the expectations regarding how much gas will be needed for power burn becomes more of a reality.

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 May 16, 2019.

Supply:

  • Dry gas production decreased 0.14 Bcf/d. Most of the decrease came from the South Central/Gulf region, which fell 0.15 Bcf/d.
  • Canadian net imports decreased 0.13 Bcf/d on the week.

Demand:

  • Domestic natural gas demand increased 1.04 Bcf/d week over week. Res/Com demand accounts for most of the increase, gaining 1.18 Bcf/d, mainly due to cooler weather in the East. Power demand showed a drop of 0.35 Bcf/d, while Industrial demand gained 0.21 Bcf/d.
  • LNG exports increased 0.23 Bcf/d week over week, while Mexican exports increased 0.01 Bcf/d.

The ICE Financial Weekly Index report is currently expecting an injection of 110 Bcf. Last year, the same week saw an injection of 91 Bcf; the five-year average is an injection of 91 Bcf.

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