The US Energy Information Administration is expected to report an above-average 95 Bcf injection to domestic natural gas storage inventories in the week ended June 9, further adding to the US storage surplus amid market anticipation that approaching hotter weather will lift overall US gas demand, according to the latest S&P Global Commodity Insights survey of market analysts.
Total US gas demand during the week ended June 9 increased about 3 Bcf/d from the week prior while a slight decline in production offset a small uptick in net imports from Canada, leaving less supply available for injection into storage.
The increased demand during the week was mainly driven by a 4 Bcf/d increase in gas-fired power demand that was offset partially by about a 1.5 Bcf/d decline in LNG feedgas demand with ongoing maintenance activities at US export facilities. US pipeline exports from the US to Mexico rose by about 150 MMcf/d.
"You are seeing an increase in demand last week and a reduction of production," Phil Flynn, senior account executive at Price Futures Group said June 13. "Exports are also starting to pick up a little bit."
A 95-Bcf injection would still look bearish compared with the average 84 Bcf build to US inventories over the past five years and the 94 Bcf injection observed in the corresponding week last year. Assuming the predicted stock change is accurate, US inventory levels would rise to 2.645 Tcf, increasing the storage surplus to 364 Bcf, or 16% above the five-year average. The surplus to 2022 inventory levels would rise to 563 Bcf, or 27% above the year-ago level, data from EIA shows.
NYMEX
NYMEX Henry Hub gas futures traders have shown little change in sentiment over the past week, with prompt-month prices continuing to trade in a range from the upper $2.20s/MMBtu to mid-$2.30s/MMBtu, after the EIA reported an injection of 118 Bcf for the week ended June 2.
The surprisingly large injection was net bearish, implying total gas demand was less-than-anticipated for the week. But the EIA marked down the net change to Lower-48 stocks to 104 Bcf, resulting from a reclassification of 14 Bcf injected to non-salt inventories in the South-Central region from working gas to base gas.
Henry Hub futures for the balance of summer, or the months from July to October, have fallen significantly in recent weeks to trade at an average of about $2.36/MMBtu June 12, down about 17 cents from mid-May.
Fundamentals
Market analysts have pointed to less gas than expected in the South-Central region, approaching summer weather, and pressure on production in Haynesville as factors that could tighten US supply and demand in the coming weeks.
As it stands, recent weeks have seen traders' confidence in the market's forward contango dwindle, suggesting diminished expectations of tightening supply.
For the week in progress, S&P Global Commodity Insights' latest supply-demand model is calling for another above-average injection of 96 Bcf, likely increasing domestic inventories to more than 2.7 Tcf.