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Weekly US natural gas storage injection dwarfs five-year average build: EIA

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Weekly US natural gas storage injection dwarfs five-year average build: EIA

Highlights

Stocks increase by 61 Bcf: EIA

Forecasts calls for season to end at 3.5 Tcf

  • Author
  • Brandon Evans    Kent Berthoud    Jack Winters
  • Editor
  • Jennifer Pedrick
  • Commodity
  • Natural Gas

Natural gas injected into US underground storage fields the week ended April 9 dwarfed the five-year average once again, but the Henry Hub summer strip gained some ground while the latest forecasts for the end-of-season total neared 3.5 Tcf.

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Inventories increased 61 Bcf to 1.845 Tcf, US Energy Information Administration data showed April 15.

The build was less than the 65 Bcf addition expected by an S&P Global Platts' survey of analysts, but it far surpassed the five-year average build of 26 Bcf, according to EIA data.

The week ended April 9 spanned the Easter holiday, which typically produces notable decreases in demand. Total demand fell 6 Bcf/d, with residential and commercial losses accounting for 4.5 Bcf/d of the drop, according to Platts Analytics.

While gas continued to take incremental market share from coal, lower power loads resulted in a weakened call on thermal generation, producing a nearly 1 Bcf/d decline in gas-fired power generation week over week.

The NYMEX Henry Hub May contract added 3 cents to $2.65/MMBtu in trading after the release of the weekly storage report. The summer strip, spanning May through October, added 2 cents to average $2.77/MMBtu. At $2.59/MMBtu, Henry Hub cash was up about 7 cents from one month prior.

Stronger-than-expected US production has resulted in a 1 Bcf/d upward revision to Platts Analytics' summer 2021 production forecast and an increase to the October 2021 US storage forecast from 3.3 Tcf to 3.5 Tcf. This has translated to a lower summer Henry Hub price forecast, which dropped from $3.00/MMBtu to $2.80/MMBtu, marginally above the current summer strip.

The South Central region added 30 Bcf, measuring 11 Bcf stronger than the five-year average. Permian production was on pace to average 11.75 Bcf/d in April, which would be flat to March but roughly 200 MMcf/d below pre-freeze levels in February and January, according to Platts Analytics.

Due to the lower production and unconstrained outflow corridors, Waha basis in April was on pace to average 22 cents below Henry Hub with a monthly high of just 9 cents below Henry Hub. The support for Waha forwards has been more noteworthy. The balance-of-summer strip has tightened to 4 cents behind Henry Hub, pushing to 3- and 6-cent premiums for July and August, respectively.

The upcoming winter strip was even stronger at a 2-cent premium to Hub, peaking in January and February at 10 cents above Henry Hub. The last time the monthly average settled above Henry Hub was Dec. 2015 with a 2-cent premium when Hub was $1.88/MMBtu. The significant strength in the forwards highlighted not only the expected supply shortage but the stiff competition for Permian gas between East Texas and the Southwest.

Storage volumes now stood 242 Bcf, or 11.6%, less than the year-ago level of 2.087 Tcf; and 11 Bcf, or 0.6%, less than the five-year average of 1.834 Tcf.

Platts Analytics' supply and demand model currently forecasts a 37 Bcf injection for the week ending April 16, which would match the five-year average.