Story By: S&P Global – Injections to US natural gas storage likely outpaced the historical average again in mid-October, even as cooler weather in the Northeast and Central South fueled weekly gains in heating and power demand.
In its upcoming Oct. 26 inventory report, the US Energy Information Administration is expected to announce an 81 Bcf build to US gas storage in the week prior, according to the latest survey of market analysts from S&P Global Commodity Insights. Responses to this week’s survey were mostly reported in a narrow range from about 70-85 Bcf, excluding just one high-side outlier estimate.
In the week to Oct. 20, US gas market fundamentals tightened as stronger domestic demand more than offset a modest uptick in production, data from S&P Global Commodity Insights showed.
In the third week of October, US residential-commercial gas demand climbed by nearly 1.3 Bcf/d compared with the week prior to average 15.4 Bcf/d, or its highest since early May. Cooler temperatures also spurred smaller gains in power and industrial demand, which were both up about 200 MMcf/d on the week. US LNG exports were also higher, rising about 1 Bcf/d on the week to average over 14 Bcf/d.
On the supply side, US production climbed by about 800 MMcf/d while the import-export balance was nearly unchanged. On balance, the US gas market tightened in the week by roughly 1.8 Bcf/d.
According to analysts’ consensus projection, the tighter market balance should translate to an 81 Bcf injection to storage for the week – down from the prior-week build of 97 Bcf. By historical standards, an 81 Bcf injection would still look relatively bearish compared with the five-year average build of 66 Bcf and the year-ago injection of 61 Bcf, data from the US Energy Information Administration showed.
Assuming analysts’ consensus estimate of 81 Bcf is accurate, US inventory levels would rise to 3.707 Tcf. The surplus to the five-year average would widen to 190 Bcf, or about 5.5%, above the historical average, while the surplus to 2022 would expand to 320 Bcf, or nearly 9.5%, above the year-ago level.
NYMEX Gas Futures
On Oct. 24 the NYMEX November gas futures contract was up about 1-2 cents on the day to trade around $2.95/MMBtu, data from CME Group showed. Over the past two weeks, the November gas contract has traded into the mid-$3s before coming under pressure more recently following a relatively bearish storage report released Oct. 19 when the EIA reported a 97 Bcf addition to US stocks.
“We’ve got some larger-than-normal storage builds ahead of us – that’s the main obstacle, but I think we’re towards the low side of about a 60-cent trading range here,” said Jim Ritterbusch, president of Ritterbusch & Associates. “I think there’s much more upside than downside price risk.”
For now, though, Ritterbusch sees little upside for the gas futures market ahead of colder weather.
“Production is pretty strong and the weather is still not giving us enough HDD accumulation to really spur much buying,” he said by telephone Oct. 24.
For the week ending Oct. 27, S&P Global’s gas supply-demand model is already projecting another above-average build of 91 Bcf. If accurate, the predicted injection would be nearly 60% larger than the five-year average injection of 57 Bcf but about 10% smaller than the year-ago build of 99 Bcf, data from EIA showed.
