Denver — Last week's addition to natural gas in storage proved much larger than the market expected, prompting the remaining Henry Hub summer strip to fall more than 10 cents.
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The amount of natural gas in US storage facilities increased 120 Bcf to 3.012 Tcf in the week that ended June 19, according to US Energy Information Administration data released June 25.
The injection was significantly above the consensus expectations of an S&P Global Platts' survey of analysts, which called for a 107 Bcf build. Responses to the survey ranged from an injection of 88 Bcf to one of 120 Bcf.
The injection was also larger than the 103 Bcf reported during the same week last year and the five-year average build of 73 Bcf, according to EIA data.
In addition, the injection was larger than the 85-Bcf build the week prior as LNG feedgas deliveries fell for the sixth straight week.
Storage volumes now stand 739 Bcf, or 32.5%, above the year-ago level of 2.273 Tcf and 466 Bcf, or 18.3%, above the five-year average of 2.546 Tcf.
The entire NYMEX Henry Hub contract strip has traded down sharply following a significantly bearish increase in storage levels last week, which exceeded most expectations. The biggest losses were on the balance-of-summer contracts extending from July through October, with July falling nearly 9 cents to a weighted average price of $1.54/MMBtu and October selling off 6 cents, down to $1.77/MMBtu.
Following another large storage injection that pushed stocks to over 3 Tcf, a level typically not hit until August, the Henry Hub balance-of-summer strip tumbled to $1.60/MMBtu
The prompt-month contract is now trading at its lowest levels of at least the last 10 years. Sustained losses in LNG feedgas demand in the Gulf region continue to pose a massive headwind on prices in the near term. The ICE end-of-season storage contract is now trading around the 4 Tcf mark, a nearly 300 Bcf increase since the start of the injection season.
Platts Analytics' supply-and-demand model currently expects a 74 Bcf injection for the week that ended June 26, which would be 9 Bcf more than the five-year average.
A quick warm-up in weather across the eastern US this week is contributing to a continued whipsaw in power burn demand, which has risen by nearly 6 Bcf/d compared with the reference week, with most of the return of power loads being concentrated in the Northeast and Southeast cell regions.
Total US demand is coming in 5.5 Bcf/d higher on average, with gains in power being weighed down by concurrent declines in the residential-commercial and industrial demand sectors. Upstream, domestic supplies have held virtually flat, but a 0.4 Bcf/d increase in net Canadian imports, combined with a small increase in LNG sendout, has total supplies trending 0.5 Bcf/d higher on the week for an average of roughly 91 Bcf/d.