Denver — US natural gas injections into underground storage most likely will decline for the fourth straight time last week, in part because of a recovery in industrial demand, but a sharp rise in coronavirus cases across the Southeast could dampen demand moving forward.
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The US Energy Information Administration is expected to report a 33 Bcf injection for the week ended July 17, according to an S&P Global Platts survey of analysts. Responses to the survey were tight, ranging from injections between 28 Bcf to 38 Bcf.
A build within that expectation would increase stocks to 3.211 Tcf.
A 33 Bcf injection would be below the 44 Bcf addition in the corresponding week a year ago and the five-year average build of 37 Bcf. The surplus to the five-year average would contract to 432 Bcf, and the overhang to 2019 would shrink to 652 Bcf. The injection looks to be less than the 45 Bcf build reported for the week prior.
A 33 Bcf build would mark the fourth consecutive week injections have trended below the five-year average.
Warmer-than-normal weather and low prices at Henry Hub have pushed up power burn demand nearly 6 Bcf/d in the last month, reducing the surplus that has amassed since last fall, according to S&P Global Platts Analytics. US gas production has found a lower range at 85 Bcf/d to 87 Bcf/d, and recovery in associated gas production appears to be elusive for the time being. Along with higher use of gas in power, US gas storage injections have become less intense and the fear of running out of room prior to October is beginning to wane.
Industrial demand has also shown some signs of life this month, reducing the year-on-year differential to the smallest levels since March, largely because of a higher utilization rate in the chemical and refinery sectors.
After state and local governments eased lockdowns at the start of June, sample gas nominations to industrial facilities declined for three straight weeks, losing about 200 MMcf/d over the course of the month. Almost all of those losses have recovered over the first half of July. But the growing number of new coronavirus cases, particularly in the southern US, remains a risk factor moving forward, according to Platts Analytics.
The NYMEX Henry Hub August contract rose 3 cents to $1.67/MMBtu during afternoon trading Tuesday.
Platts Analytics' supply-and-demand model currently expects an even smaller injection of 25 Bcf for the week ending July 24. This would reduce the surplus to the five-year average by 11 Bcf.
EIA plans to release its weekly storage report 10:30 am ET July 23.