EIA reports bearish-to-consensus build in US gas storage stocks, pressures NYMEX futures

The US Energy Information Administration June 22 reported a larger-than-anticipated 95 Bcf injection to US working gas storage in the week prior, a relatively bearish estimate that showed a widening inventory surplus before the hot summer weather starts to significantly tightenUS market fundamentals.

Many market participants had expected a slightly smaller injection in the week to June 16 amid rising gas-fired power demand, with hotter temperatures arriving in key markets for cooling demand into mid-June. According to S&P Global Commodity Insights' latest weekly gas storage survey, the EIA was expected to report an injection of 92 Bcf.

The 95-Bcf injection in the week to June 16 was about 10% larger than the average 86-Bcf build reported in the corresponding week over the past five years. The injection was also about 25% above the stock build of 76 Bcf a year earlier.

According to the EIA, domestic inventory has now risen to 2.729 Tcf, which is 362 Bcf, or about 15%, above the five-year average of 2.367 Tcf and 571 Bcf, or nearly 27%, above the previous year's level of 2.158 Tcf.

NYMEX futures

NYMEX prompt-month futures dropped about 5-6 cents in the hour following the release of the EIA's storage report to trade in the mid-$2.50s/MMBtu, intraday exchange data from CME Group showed.

Market analysts have been awaiting a rise in summer power demand and a rebound in US LNG feedgas demand to tighten US supply-demand fundamentals, reducing the amount of surplus gas available for injection.

Fundamentals

US LNG feedgas demand remains curtailed with ongoing maintenance at US export facilities, averaging nearly 11 Bcf/d in the week ended June 16 compared with about 13 Bcf/d in May. Spring maintenance at US LNG terminals tends to be clustered around May and June. Planned maintenance remains underway at the biggest US LNG export terminal -- Cheniere's Sabine Pass -- as part of a six-year maintenance cycle at the facility.

According to the National Weather Service's latest eight-to-14 day outlook, temperatures across the Midwest, Texas, the Gulf Coast, the West Coast and the Northeast are likely to trend above average from June 29 to July 5 -- potentially fueling stronger demand for gas-fired power burn.

However, during the week so far, a roughly 250 MMcf/d decline in domestic production has been offset by a slight drop in overall US gas demand.

S&P Global's natural gas supply-demand and storage models are calling for an above-average injection to US gas storage in the week ending June 23, with the latest projections at a range of 86 Bcf to 95 Bcf. The predicted injection range compares with an average build of 80 Bcf reported in the corresponding week over the past five years. The forecast range would also exceed the stock build of 81 Bcf reported in the corresponding week of 2022, EIA data showed.