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US working natural gas in underground storage increases by 58 Bcf: EIA

Highlights

Deficit to five-year average narrows to 11.9%

Slightly below survey expectations of 61 Bcf

Texas, SE power burn up 27% this July over last

US natural gas working stocks rose 58 Bcf during the week ended July 8, slightly below market expectations, after ongoing heat wave conditions in Texas and the Southeast kicked gas-fired power demand into high gear.

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Storage inventories climbed to 2.369 Tcf for the week ended July 8, the US Energy Information Administration reported on July 14.

The build was less than an S&P Global Commodity Insights' survey of analysts calling for a 61 Bcf injection, although around the midpoint of a response range of 38-77 Bcf.

While a touch below expectations, the weekly injection was more than the 49 Bcf build reported during the corresponding week in 2021 as well as the five-year average injection of 55 Bcf, according to EIA data. As a result, stocks sat 252 Bcf, or 9.6%, below the year-ago level of 2.621 Tcf and 319 Bcf, or 11.9%, less than the five-year average of 2.688 Tcf.

Mixed response from US gas futures

US natural gas futures had a mixed reaction to the July 14 storage report, with the NYMEX Henry Hub August contract moving both above and below its prior-day settlement in post-report trading.

In the 30 minutes before the report launched, the August contract was trading around $6.75/MMBtu, up around 6 cents from its July 13 settle. In the minutes after the weekly storage report published, the contract fell a few cents to trade around $6.72/MMBtu, before both hurtling up past $6.80/MMBtu and back into the $6.50s/MMBtu in the hours after.

The August contract eventually settled at $6.60/MMBtu, down 8.90 cents from its prior settlement, data from CME Group shows.

South Central heat wave

July has brought scorching temperatures to Texas and the Southeast, spiking gas demand for cooling and reducing gas flows into storage.

Month-to-date gas-fired power demand for the two regions has averaged 21.73 Bcf, up 4.6 Bcf, or 27%, from the same time last year. In Texas, the Electric Reliability Council of Texas saw multiple days of peakload record-highs, including July 5 and July 8.

This unusually strong call on gas supply has showed up in the weekly storage results for the South Central region, where gas stored in salt caverns saw a net withdrawal of 12 Bcf for the week ended July 8. This pull expanded South Central salt storage's deficit to the five-year average to 24.3%.

The net withdrawal from the region's salt-based storage balanced out a 12 Bcf injection into non-salt storage in the South Region, keeping the overall region's storage levels steady at 890 Bcf for a second week in a row.

Net withdrawals or unchanged storage levels during injection season are not unheard of in the South Central region, where hot summers often provide high-demand conditions. However, these conditions are more typical of late July and August. The South Central region's typical storage outcome for the week ended July 8 is a net build of 4 Bcf.

Outlook

A forecast by S&P Global's supply and demand model calls for a much lesser draw of 25 Bcf for the week ending July 15, which would widen the deficit to the five-year average back out to 12.3%. A net build of 25 Bcf would be lower than both the five-year average build of 41 Bcf and the corresponding week in 2021's build of 50 Bcf.

The same heat wave conditions that elevated gas demand during the week ended July 8 intensified during the week ending July 15, with even higher gas-fired power demand observed.