US natural gas storage injection expected to nearly triple five-year average: analysts

Analysts expect a US natural gas storage injection nearly three times larger than the five-year average as warmer temperatures combine with demand destruction due to the ongoing coronavirus epidemic.

The US Energy Information Administration is expected to report a 71 Bcf injection for the week that ended April 10, according to a survey of analysts by S&P Global Platts.

Responses to the survey ranged from an injection of 58 Bcf to one of 81 Bcf. The EIA is scheduled to release its weekly storage report on Thursday at 10:30 am ET (1430 GMT).

A 71 Bcf injection would be close to the 73 Bcf injection in the corresponding week last year, but much larger than the five-year average build of 27 Bcf. An addition meeting analysts' expectations would increase stocks to 2.095 Tcf. The surplus to the five-year average would expand to 368 Bcf, and the overhang to 2019 would drop by 2 Bcf to 874 Bcf.

The US gas market is piling onto an already formidable surplus of gas stocks this April. While there remain significant uncertainties regarding the next few months, the recent declines in residential and commercial, gas-fired generation and industrial demand are likely to persist as long as widespread social distancing remains in effect, keeping a lid on prices at Henry Hub.

Residential and commercial plus industrial demand posted week-over-week declines of 3.2 Bcf/d and 0.8 Bcf/d, respectively, according to Platts Analytics. On the supply side, US production increased by about 0.2 Bcf/d week over week, with recent increases split between the Midcontinent and Northeast. For the first time this year, every EIA storage region is expected to report a net injection for the week that ended April 10.

The NYMEX May gas futures contract fell 7 cents to $1.65/MMBtu during afternoon trading Tuesday. The remaining summer strip fell by an average of 5 cents to $1.99.

The front end of the NYMEX futures curve has been trapped between $1.50/MMBtu and $2/MMBtu for more than a month now amidst the ongoing coronavirus as well as the oil price war. The 2020-2021 winter contracts are now about $1.10/MMBtu higher on average than the nearby contract — a premium not seen since 2012.

However, the summer offers some hope the market will tighten as associated gas production wanes, and low prices incentivize strong summer power burn, according to Platts Analytics.

Platts Analytics' supply and demand model currently expects a 30 Bcf injection for the week ending April 17, compared with a five-year average build of 49 Bcf.