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US gas storage injection falls below average as tight market balance persists

Highlights

Inventories at 2.1 Tcf remain 4% below average

Henry Hub prompt futures dipped 5 cents to $2.92/MMBtu

US natural gas storage fields added 71 Bcf last week, marking the fourth straight below-average injection this season that comes as tighter supply-demand fundamentals in the US market endure.

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Inventories edged up to 2.1 Tcf for the week ended May 14, the US Energy Information Administration reported May 20. The addition to US stocks was less than the 84 Bcf injection reported during the corresponding week in 2020 and below the five-year average build of 86 Bcf, according to EIA data.

As a result, stocks were 391 Bcf, or nearly 16%, below the year-ago level of 2.491 Tcf and 87 Bcf, or 4%, less than the five-year average storage level of 2.187 Tcf.

While still bullish, the mid-May inventory build outpaced levels anticipated by an S&P Global Platts survey of analysts, which predicted a 67 Bcf injection earlier this week.

Following the release of the EIA's storage report, the NYMEX Henry Hub prompt-month futures contract fell about 5 cents from its previous settlement price as the market absorbed news of the slightly larger-than-anticipated build. By early afternoon, the June contract retraced some of its mid-morning losses to finish trading at $2.93/MMBtu — down about 4 cents on the day, S&P Global Platts data showed.

Demand

In the second week of May, the US market balance tightened compared with the prior week, as abnormally low US temperatures boosted late-season heating demand across much of the Lower-48 states.

During the week, total US demand averaged nearly 80 Bcf/d — up over 800 MMcf/d, or about 10%, compared with the week prior. The weekly gain was propelled mostly by lower temperatures in the Midwest and the Northeast, where residential-commercial demand was up sharply.

In the Midwest, population-weighted temperatures averaged just 50.1 degrees Fahrenheit, or about 9 degrees below normal, during the week ended May 14. As a result, gas-fired heating demand climbed nearly 1.2 Bcf/d compared with the week prior. In the Northeast, a smaller but still significant drop in temperatures lifted heating demand there some 600 MMcf/d.

Along with smaller gains in other regions, the total US residential-commercial figure climbed more than 2.3 Bcf/d during the week, Platts Analytics data shows.

Supply

Stronger demand in the week ended May 14 was only partially offset by a 300 MMcf/d increase in domestic production which climbed to an average 90.5 Bcf/d.

Imported pipeline supply from Canada was also up last week by about 240 MMcf/d but was mostly offset by a 180 MMcf/d increase in exports to Mexico.

Compared with pre-pandemic production levels at over 95 Bcf/d, upstream supply remains depressed and will likely keep the US domestic market balance significantly tighter this injection season.

According to recent forecasts from Platts Analytics, production will likely remain rangebound during this summer's peak-demand season, averaging around 91 to 92 Bcf/d.

Outlook

For the week in progress, Platts Analytics supply-demand model is predicting the first bearish injection in over a month at 96 Bcf, as warmer weather put the brakes on heating demand.

If realized, this week's anticipated storage injection would register just 5 Bcf above the five-year average build of 91 Bcf, but would still undershoot last year's inventory addition, which totaled 105 Bcf during the corresponding week in May 2020.