US natural gas working stocks rose by 32 Bcf during the week ended July 15, undershooting market expectations and providing bullish fodder for US gas futures markets.
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Storage inventories rose to 2.401 Tcf for the week ended July 15, the US Energy Information Administration reported on July 21.
The build was well below an S&P Global Commodity Insights survey of analysts calling for a 44 Bcf net injection, although it was within the wider range of 25-58 Bcf.
The weekly injection also was less than the 50 Bcf build reported during the corresponding week in 2021, and below the five-year average draw of 41 Bcf, according to EIA data. As a result, the deficit to both the five-year average and year-ago week widened. Stocks in the most recent reporting week were 270 Bcf, or 10.1%, below the year-ago level of 2.671 Tcf, and 328 Bcf, or 12%, below the five-year average of 2.729 Tcf.
US gas futures
The smaller-than-expected build initially galvanized US gas futures July 21, with the session's highs giving way to a more tepid response by the close of trading.
The NYMEX Henry Hub August contract surged 35 cents to $8.10/MMBtu in the 10 minutes of trading following the weekly storage report, erasing the pre-storage report pricing weakness observed earlier in the session. The contract had been trading around $7.75/MMBtu in the 30 minutes before the July 21 storage report launched, down around 25 cents from its prior-day rally to $8.007/MMBtu. Prior to July 20, the NYMEX prompt-month contract last settled above $8/MMBtu in mid-June.
At close, the August contract settled at $7.932/MMBtu, down 7.50 cents from its prior day's settlement.
Gas-fired power demand
Ongoing heat wave conditions have spiked power sector demand for gas so far in July, absorbing volumes that might otherwise have flowed into storage.
Total US power burn demand has exceeded the five-year average every day since June 18, Platts Analytics data showed. Between July 1-20, 14 days have seen power burn demand outpace the five-year maximum as well.
Gas-fired power demand has been especially strong in Texas and the Southeast, which are largely captured in the EIA's South-Central region.
The South-Central region saw a 16 Bcf withdrawal from storage for the week ended July 15, the region's first net pull so far this injection season. Withdrawals from salt caverns drove the net decrease in storage, with non-salt storage recording no change from the previous week.
While pulls from South-Central storage are not uncommon for mid-July through August, as states in the southeast quadrant of the country grapple with summer cooling demand, the pull was four times larger than the region's five-year average of 4 Bcf for the same week.
A forecast by the S&P Global supply and demand model called for a much lower build of 14 Bcf for the week ending July 22, which would be below both the five-year average build of 32 Bcf and the year-ago build of 38 Bcf.
Very hot temperatures have continued into the week in progress, with the National Weather Service issuing excessive heat warnings and heat advisories across the Eastern Seaboard, large swaths of the Southeast and East Texas, and parts of the Southwest.