US natural gas in storage looks to record rare April triple-digit build: survey

Denver — US gas in storage looks as if it could feature a very rare triple-digit build in April for the last week of the month, but the Henry Hub prompt contract still rocketed past the $2 mark in trading Tuesday as production declines spread across oil-rich basins.

The US Energy Information Administration is expected to report a 105 Bcf injection for the week ended May 1, according to a survey of analysts by S&P Global Platts. Responses to the survey ranged from an injection of 88 Bcf to 116 Bcf. The EIA plans to release its weekly storage report on Thursday at 10:30 am ET.

A 105 Bcf injection would be more than the 96 Bcf addition in the corresponding week last year as well the five-year average build of 74 Bcf. An addition within expectations would increase stocks to 2.315 Tcf. The surplus to the five-year average would increase to 391 Bcf, and the overhang to 2019 would grow to 792 Bcf.

The week ended May 1 represents a likely turning point for the US gas market as the short-term demand destruction related to COVID-19 begins to be eclipsed by long-term production losses, according to S&P Global Platts Analytics. Multiple bearish factors collided for the final week of April. Warm weather and non-essential business closures kept a lid on residential and commercial demand while economic headwinds buffeted industrial demand.

In the past decade, the EIA has only reported a triple-digit injection in April on one other occasion, but this springtime stockpiling is unlikely to last much longer. Platts Analytics expects US production to drop by more than 10 Bcf/d over the next two months due to the collapse of crude oil prices, which will support Henry Hub through the second half of 2020.

The NYMEX Henry Hub June contract jumped 15 cents to $2.14/MMBtu during afternoon trading on Tuesday. The prompt-month contract has not closed above the $2 mark since January.

The shoulder-season buildup is likely to come to an abrupt end over the next month as US production begins to see shut-ins due to the collapse of crude oil prices, and states begin tentatively lifting stay-at-home orders.

Platts Analytics' supply and demand model currently expects a 104-Bcf injection for the week ending May 8, which is 19 Bcf more than the five-year average. However, cooling demand is expected to bring builds below 100 Bcf in the weeks following.