US working natural gas in storage rises by 85 Bcf, smallest build in four weeks: EIA

Denver — US natural gas storage inventories rose 85 Bcf in the week ended June 12, the US Energy Information Administration reported June 18, as gas demand from power generators continued to increase amid an extended spell of summer-like weather across the Lower-48 states.

The injection was 6 Bcf above an S&P Global Platts' survey of analysts calling for a 79 Bcf addition to stocks. Responses to the survey ranged from injections of 70 Bcf to 86 Bcf. The weekly build was just 2 Bcf/d below the five-year average injection of 87 Bcf, according to EIA data.

US inventories climbed to 2.892 Tcf as a result, equivalent to a 722 Bcf, or 33%, surplus to the year-ago level of 2.170 Tcf. The surplus to the five-year average barely narrowed during the week, falling to 419 Bcf, or about 17%, above its average level for mid-June.

Supply, demand

The weekly injection was the smallest volume of gas added to inventories in four weeks, propelled by a modest tightening in the US supply-demand balance. Total supply during the week was down about 900 MMcf/d to an average 90 Bcf/d, propelled by a drop in offshore production from Tropical Storm Cristobal and a 600 MMcf/d drop in net pipeline imports from Canada, S&P Global Platts Analytics data showed.

Total US gas demand during the week was buoyed by a surge in exports to Mexico, which climbed to a single-day record of 5.8 Bcf/d, adding about 400 MMcf/d in additional demand on the week. In the US domestic market, warmer weather drove gas-fired power burn demand higher by 2.3 Bcf/d. A continued decline in US feedgas demand, which was down another 1.2 Bcf/d on the week, weighed on the balances, adding to the market's increasingly bearish sentiment.

Market outlook

The NYMEX July gas futures contract traded in a narrow range June 18, hovering near its prior-day close at $1.64/MMBtu. After plummeting to a fresh 20-year low at just $1.38/MMBtu June 16, the Henry Hub cash market has weighed on prompt futures, which are down 17 cents, or about 9% in the past week. Similar bearishness has extended into summer forwards markets too, with the balance June, July, and August contracts settling at an average price of just $1.63/MMBtu June 17.

Weakness in the cash, futures, and forwards markets could linger in the weeks ahead as gas demand struggles to recover from the coronavirus pandemic and US gas production continues to rebound.

Through mid-June, LNG feedgas demand has averaged just 4 Bcf/d this month, down from a prior-year average at more than 5.5 Bcf/d and a record high in March at over 9.6 Bcf/d. With additional cargo cancellations now expected in July and August, it's likely that LNG feedgas demand will remain depressed through the summer months.

At US refineries and chemical facilities, demand also continues to falter with total industrial sector consumption lagging its year-ago level by roughly 2.1 Bcf/d this month. Platts Analytics expects demand to face a slow road to recovery in the months ahead as a global recession limits consumption of industrial outputs.

Adding more length to the US market, gas production now appears to be rebounding, averaging over 86.9 Bcf/d in the seven-day period ending June 18, up about 500 MMcf/d compared with its second-half May average, Platts Analytics data shows.