US natural gas in storage modestly widened its deficit to the five-year average in early June in a weekly stock build that was largely neutral to market expectations but still bullish for NYMEX gas futures.
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The US Energy Information Administration on June 9 reported a 97 Bcf injection to US inventories for the week ended June 3. The addition to stocks was closely aligned with S&P Global Commodity Insights' storage survey result, which called for an injection of 96 Bcf. The weekly build was also much closer to historical averages, just barely undershooting the year-ago injection of 98 Bcf and the five-year average of 100 Bcf in the corresponding week, data from the EIA showed.
As a result, US working gas inventories climbed to 1.999 Tcf, while the shortfall to 2021 widened to 398 Bcf, leaving stocks about 17% below the year-ago level of 2.397 Tcf. The inventory deficit to the prior five-year average also expanded to its widest yet this season, pushing stocks to 340 Bcf, or almost 15%, below the historical average of 2.339 Tcf.
Immediately following the EIA storage report's release, the Henry Hub July contract jumped about 25 cents to $8.45/MMBtu, followed by continued price gains throughout the morning and early afternoon that left the prompt-month contract just shy of $9/MMBtu at settlement, data from CME Group showed.
The sharp rebound in NYMEX gas prices on June 9 came following a prior-day and overnight selloff to the low-$8s, apparently sparked by news of an explosion at the Freeport LNG export facility in Texas.
On June 9, feedgas deliveries to the terminal were down for a second consecutive day to an estimated 235 MMcf/d. On June 8, deliveries to the terminal plunged below 400 MMcf/d as Freeport's three liquefaction trains were shut down for inspection and possible repair. During the prior week, feedgas deliveries to Freeport had averaged just under 2 Bcf/d, Platts Analytics data shows.
With feedgas demand from Freeport LNG offline, the additional 2 Bcf/d in gas supply could potentially be redirected to storage over the coming days or even weeks, temporarily loosening spot market supply and casting a shadow of uncertainty over the NYMEX futures rally.
During the week ended June 3, rising temperatures across the Northeast, the central US and the Rockies fueled a combined drop of 3.1 Bcf/d in US residential-commercial and industrial gas demand. In all three regions, flows into inventory either matched or outpaced the prior five-year average for the week and were only partially offset by a weaker net injection in the South Central region where hotter weather fueled an increase gas-fired power demand.
For the week ending June 10, the upward revision to gas supply in the South Central region stemming from the recent shut-in at Freeport LNG could allow more of the region's supply to move into storage.
As of June 9, Platts Analytics storage model is now estimating a net injection to US inventory of 95 Bcf for the week in progress – up 11 Bcf from the model's weekly prediction on June 7.
Assuming the storage model estimate is accurate, the EIA's coming report would narrow the inventory deficit by 16 Bcf, potentially fueling a steep drop in NYMEX futures prices back toward the low-$8 or even upper-$7 range.