Weekly U.S. Natural Gas Storage Construction Below Average Expected Amid Growing Electricity Demand
Storage survey shows weekly net build of 70 billion cubic feet expected
Electricity consumption from June 11 to 17 is the highest for this week since 2012
NYMEX Henry Hub invite drops to 7-week low on June 21
The U.S. Energy Information Administration (EIA) is expected to report an injection of 70 billion cubic feet into U.S. gas storage for the week ending June 17, according to an analyst survey by S&P Global Commodity Insights. Above-average gas-fired electricity demand likely diverted some of the excess gas supply from the Freeport LNG outage from storage to electricity generators, resulting in below-average production.
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Survey responses were reported in a wider range this week with expected injections ranging from 48 Bcf to 96 Bcf. The EIA plans to release its weekly storage report at 10:30 a.m. ET on June 23.
A weekly injection of 70 billion cubic feet would significantly exceed the corresponding week of 2021 injection of 49 billion cubic feet, but would be well below the five-year average injection of 82 billion cubic feet. US storage levels would climb to 2.165 Tcf, increasing the shortfall to the five-year average at 335 Bcf, while narrowing the gap with the corresponding week in 2021 to 309 Bcf.
NYMEX Henry Hub July fell to $6.829/MMBtu on June 21, down about 14 cents from the previous day’s settlement, according to data from CME Group. The fast month had not settled below $6.90/MMBtu since late April. The July contract has fallen about 25% since a fire caused an extended outage at Freeport LNG in Texas on June 8.
Record heat in the eastern half of the country so far in June has pushed demand for gas-fired power above the five-year average, a dynamic exacerbated by coal market factors that have made fuel switching more difficult for generators.
Total U.S. gas-fired electricity demand averaged 40.9 Bcf/d for the week ended June 17, nearly 7 Bcf/d higher than the prior week and 3.9 Bcf/d higher than the previous year’s levels. Data from S&P Global showed that June 11-17 had the strongest demand for gas-fired electricity this week, according to a dataset dating back to 2012.
Unusually high temperatures may complicate supply and demand forecasts, which explains the wide range of survey results for the week ended June 17, according to Eric Brooks, natural gas storage analyst at S&P Global.
“Rising temperatures in the United States may cause a lag between modeled estimates of demand and actual fuel consumption, especially during transition times like now,” Brooks said.
“Regardless of the actual number, it’s clear that the change in stocks last week will be significantly lower than normal,” Brooks said.
Looking ahead, S&P Global’s supply-demand models forecast a net injection of 59 billion cubic feet for the week ending June 24 in construction that would be lower than the 73 billion cubic feet seen in both the injection of the corresponding week of 2021 and the average injection over five years.
Forecasts show very hot temperatures will continue in the Southeast and Texas for the current week, fueling demand for gas-fired electricity for cooling. A second week of disappointing injections could provide some support for natural gas futures.
Adding further pressure on storage levels, the US LNG feed gas demand situation may not be as dire as the extended shutdown at Freeport had initially suggested, as the Calcasieu Pass LNG of Venture Global is accelerating rapidly.
Pipeline naming data shows demand for Calcasieu Pass feed gas hit a new high on June 21, climbing to 1.54 Bcf. The June 21 peak is just over 20% above the monthly average of 1.28 Bcf/d and 54% above the May average of 1 Bcf/d.