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US working natural gas in underground storage rises 38 Bcf: EIA

Highlights

First build of year comes in well above average

Henry Hub May futures drop following report

  • Author
  • Brandon Evans    Eric Brooks    Kent Berthoud
  • Editor
  • Jason Lindquist
  • Commodity
  • Natural Gas

Denver — The natural gas injection season started with a bang during the week ending April 3 as storage fields added 38 Bcf, well above the S&P Global Platts survey calling for a 25 Bcf build, prompting the NYMEX Henry Hub May contract to fall, reversing gains made earlier in the week.

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Storage inventories increased to 2.024 Tcf, the US Energy Information Administration reported Thursday morning.

The injection also was above the 6 Bcf injection reported during the corresponding week in 2019 as well as the five-year average, which also comes to a 25-Bcf build. It was also 9 Bcf more than the Platts Analytics storage model, which underestimated the build in the South-Central region by 7 Bcf.

Modeling errors for the US Gulf Coast have increased since mid-March, suggesting current models are underestimating demand destruction from the coronavirus pandemic. Industrial demand, given its size and capacity, would be the most obvious driver, but residential and commercial demand also is likely playing a role, according to Platts Analytics.

Storage volumes now stand 876 Bcf, or 76%, above the year-ago level of 1.148 Tcf and 324 Bcf, or 19%, above the five-year average of 1.7 Tcf.

With the injection season now underway, the natural gas market is in a precarious position, according to Platts Analytics, because of the coronavirus outbreak and oil price war. Demand destruction is nearly certain this summer. So too are declines in associated gas production as oil producers lay down rigs across the Permian Basin.

The NYMEX Henry Hub May contract slipped 12 cents to $1.73/MMBtu in afternoon trading, following the release of the storage report.

However, prices were up about 1 cent across the balance-of-summer Henry Hub contract strip, now pricing in at about $2.04/MMBtu. The winter strip rose about 3 cents to average $2.74/MMBtu.

Platts Analytics' supply and demand model currently expects a 57 Bcf addition to US storage for the week ending April 10, which would be nearly double the five-year average build.

US-level heating degree days dropped 17% for the week in progress, cutting into residential and commercial demand across the US as storage fields shift to injections.

The South-Central region continues to lead the bearishness, injecting another 10 Bcf, which accounts for more than half of the Lower 48's sample week-on-week change. The massive build-up in both the non-salt and salt dome samples is an indicator of demand destruction along the US Gulf Coast that was possibly not reflected in demand models because of poor visibility.