EIA likely to report most bearish injection to US gas storage since April

Net injections to US natural gas storage likely outpaced the five-year average last week, even as hotter temperatures fueled a spike in power demand and an overall tightening in the domestic supply-demand balance.

The US Energy Information Administration this week is expected to report an 89 Bcf injection to US gas storage for the week ended June 10, according to this week's survey of analysts by S&P Global Commodity Insights. Responses to the survey were reported in a narrower range this week with expected injections ranging from 78 Bcf to as much as 96 Bcf. The EIA plans to release its weekly storage report on June 9 at 10:30 am ET.

The predicted inventory build of 89 Bcf would dramatically outpace the 2021 corresponding-week injection of just 28 Bcf and overshoot the five-year average injection of 79 Bcf. Assuming the survey prediction is on target, US storage levels would climb to 2.088 Tcf, narrowing the deficit to the five-year average to 330 Bcf and cutting the shortfall to 2021 corresponding-week storage levels to 337 Bcf.

NYMEX rally

In morning trading June 14, NYMEX gas futures prices tumbled over $1.60, or almost 19%, as news of Freeport LNG's extended outage whipsawed through the market. At settlement, the prompt, Henry Hub July contract ended trading at $7.19/MMBtu. The balance-of-summer contracts finished close behind, with winter gas prices holding on to a 10-15 cents premium to summer, CME Group data showed.

While the NYMEX futures market could be positioned for a modest rebound in the days ahead, the possibility of a late-2022 return to full service at Freeport has sent the gas market analysts back to the drawing board.

"This is a game changer," said Phil Flynn, senior account executive at The Price Futures Group. "Summer is over – forget about it. Their talking about a test restart in 90 days," he said by telephone June 14.

Over the next three months, lost feedgas demand at Freeport will inject an incremental 2 Bcf/d into the Gulf Coast gas market giving domestic end-users, traders and utilities extra slack to refill severely depleted inventories in the South Central gas storage region and meet potentially record summer power burns in Texas and the Southeast. According the National Weather Service, both regions are at an elevated risk for above-average temperatures during this summer's peak months: June, July and August.

Outlook

For the week already in progress, a widening heatwave and another spike in gas-fired power burn promise to more than offset the decline in feedgas demand at Freeport LNG. With US power burn projected to average a record-high 41 Bcf/d during the June 13-17 period, generator demand could spike an average 4.5 Bcf/d this week compared to last, tightening the overall domestic market balance.

For the week ending June 17, Platts Analytics' storage model is currently projecting an injection of 61 Bcf – potentially enough leave the US gas storage deficit at its widest yet this year.