US natural gas storage likely rose below five-year average for third straight week

Denver — US natural gas in storage likely posted another below-average injection volume as warmer weather across the US led to a year-to-date high in gas-fired generation demand for the week-ended July 10, but the Henry Hub balance-of-summer strip remained stagnant.

The US Energy Information Administration is expected to report a 50 Bcf injection for the week-ended July 10, according to a survey of analysts by S&P Global Platts. Responses to the survey were tight and ranged from an injection of 45 Bcf to 56 Bcf. The EIA plans to release its weekly storage report on July 16 at 10:30 am ET.

Warmer-than-normal weather across the East and Midwest for the week-ended July 10 pushed up power burn by 2.6 Bcf/d week over week, marking a year to date high of 42.6 Bcf/d, according to S&P Global Platts Analytics. Power burn demand averaged 40.4 Bcf/d over the first 14 days of last July compared to 42.5 Bcf/d over the first two weeks in July 2020.

The demand gains were partially offset by a 1 Bcf/d decline in LNG feedgas deliveries. LNG exports dropped to just 3.1 Bcf/d, which is the lowest level since February 2019.

Supplies received additional support from onshore production, and Canadian imports, which prevented most estimates for this storage injection from falling below 50 Bcf. During some of the hottest weeks of the year, power burn has largely picked up the slack from lower than expected LNG exports. However, that presents bearish risks in the coming months as the warm weather begins to recede.

A 50 Bcf injection would be less than the 67 Bcf addition in the corresponding week last year and the five-year average build of 63 Bcf. A build within expectations would increase stocks to 3.183 Tcf. The surplus to the five-year average would contract to 441 Bcf, and the overhang to 2019 would shrink to 668 Bcf. The injection looks to be even less than the 56 Bcf build reported for the week prior and would be the third consecutive below-average addition.

The week also contained the Fourth of July holiday weekend, which adds some upside risk to the injection forecast. Holidays typically result in demand declines. However, sample data over the weekend showed relatively little change, which could suggest demand is being overestimated, according to Platts Analytics.

The NYMEX Henry Hub August contract remained static at $1.74/MMBtu during afternoon trading on July 14 while the September and October contracts fell 1 cents each to $1.78 and $1.89, respectively.

Platts Analytics' supply and demand model currently expects a 42 Bcf injection for the week ending July 17, which would be 5 Bcf more than the five-year-average build.