US storage fields post first net injection of year due to mild weather: analysts

New York — US storage fields posted the first net injection of the year in the week ended March 27, according to a survey of analysts, which is one week earlier than normal, while the Henry Hub summer and winter strips slipped slightly to $2.70/MMBtu and $2.90/MMBtu, respectively.

The US Energy Information Administration is expected to report a 19 Bcf injection for the week ended March 26, according to a survey of analysts by S&P Global Platts. Responses to the survey ranged from an 8 to 30 Bcf injection. The EIA plans to release its weekly storage report on April 1.

The forecast increase in storage would be a dramatic change relative to last year and the five-year average, which saw inventories decrease by 20 and 24 Bcf, respectively. When compared with the prior week, milder temperatures weighed on demand and loosened balances.

The EIA will most likely announce the first injection of the year primarily due to the arrival of mild, spring temperatures, especially towards the end of the week to March 26, according to S&P Global Platts Analytics. However, at the same time, non-weather related demand continues to increase from LNG exporters and industries recovering from the February freeze. These non-weather factors will play a key part in the coming injection season on whether storage can build back to year-ago levels.

Lower weather-driven demand pushed US residential and commercial consumption down by almost 6 Bcf/d week on week, according to Platts Analytics. On top of dampening heating demand, power loads were also reduced due to more tepid temperatures. Weaker total loads interacted with stronger wind generation, helping to drive down the call on thermal generation. Yet, despite the much smaller call on thermal generation, US power burns only fell by 1 Bcf/d week on week. Indeed, lower gas prices stimulated incremental coal-to-gas switching as gas-fired generation grew by 2% compared to the week ended March 19.

An injection within expectations would expand stocks to 1.765 Tcf. The deficit to the five-year average would decrease to 35 Bcf, and the deficit to 2020 would slip to 224 Bcf.

Storage volumes for the current heating season appear to have peaked at 1.746 Tcf, which was 78 Bcf more than the five-year average. The latest projection by Platts Analytics has storage peaking at 3.5 Tcf in October, which would measure more than 200 Bcf below the five-year average.

The NYMEX Henry Hub May contract dropped 4 cents to $2.61/MMBtu during trading on March 30. The summer strip fell 4 cents to $2.70/MMBtu while the winter strip dipped 2 cents to $2.90/MMBtu.

Platts Analytics' supply and demand model expects a net addition of 28 Bcf, or 20 Bcf more than the five-year average, for the week ending April 2.