U.S. natural gas storage increases by 15 trillion cubic feet, bringing inventories to 1.397 trillion cubic feet as deficit grows
Deficit from five-year average extends to 303 billion cubic feet
NYMEX Henry Hub prompt hits $7.25/MMBtu
Cool weather expected to persist through late April
U.S. natural gas storage activity returned to net injections in the first week of April with an undersized addition to inventories, widening the deficit and causing a bullish reaction in the US futures market. gas Henry Hub.
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On April 14, the U.S. Energy Information Administration announced an injection of 15 billion cubic feet into U.S. storage for the week ending April 8 – its second reported build of the season, following a week-long hiatus for injections.
Construction was 5 billion cubic feet higher than predicted by an S&P Global Commodity Insights survey of analysts that called for a 10 billion cubic feet addition to stocks in the first week of April. .
The modest injection lifted US working gas inventories to 1.397 Tcf in the week ended April 8. The storage deficit widened during the week with inventories falling to 439 Bcf, or about 24%, below the previous year’s level of 1.836 Tcf and 303 Bcf, or 18%, below the five-year average of 1.7 Tcf, according to EIA data.
Immediately following the release of the EIA’s storage report, NYMEX Henry Hub fast futures gained around 15-20 cents, trading at all-time highs as $7.25/MMBtu, according to data from the CME group.
The resumption of net injections into gas storage has done little to dampen bullish sentiment in futures and futures markets as lingering cool spring weather exacerbates this season’s lingering inventory shortfall, promising to fuel demand for additional storage over the coming summer months.
For the week ending April 23, temperatures are expected to remain well below average in the Upper Midwest, the Mississippi Valley and along the East Coast, according to a six- to 10-day forecast released by the US National. Weather Service on April 13. .
A regional weather forecast released by S&P Global shows average temperatures in the mid-continent market area will remain nearly 9 degrees Fahrenheit below normal for the next seven days. In the Northeast, another key heating market, temperatures are expected to average about 2 F below normal. In both regions, heating demand is expected to exceed seasonal averages.
For the report weeks ending April 15 and April 22, S&P Global’s gas supply-demand model currently projects injections of 45 billion cubic feet and 42 billion cubic feet, respectively. Assuming this forecast is correct, US inventories would widen their gap from the five-year average to 311 billion cubic feet, which could create the largest storage shortfall so far this season.
Inventory depletion will ultimately necessitate compensatory injection demand to reach near-normal pre-winter levels this year, averaging more than 3.6 Tcf in early November, according to data from the EIA. This summer, however, utilities and storage traders looking to replenish U.S. inventories will be forced to compete with potentially record export demand. Last month, LNG feed gas in the United States hit multiple single-day records at more than 13.4 billion cubic feet per day.
As Venture Global’s Calcasieu Pass terminal continues to ramp up, average daily feed gas demand is expected to approach this level by August. Assuming domestic production remains around its current level at 93-94 Bcf/d, increased storage and export demand this summer could mean that benchmark gas prices near $7/MMBtu are here to stay.