Denver — Last week's addition to US natural gas in storage proved larger than the market expected, expanding the storage surplus to the five-year average, but Henry Hub winter strip prices held firm as rising demand pushes down the build for the week in progress.
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US underground natural gas storage inventories increased 58 Bcf to 3.332 Tcf in the week that ended Aug. 7, according to data released by the US Energy Information Administration Aug. 13.
The injection was larger than the consensus expectations of analysts surveyed by S&P Global Platts, who were calling for a 51 Bcf build. Responses to the survey were wide, ranging from an injection of 34 Bcf to one of 60 Bcf. The injection was larger than the 51 Bcf build reported during the same week a year ago as well as the five-year average increase of 44 Bcf, according to EIA data.
It was also stronger than the 33 Bcf build reported for the week ended July 31.
Fundamentals during the reference week were about 3.7 Bcf/d looser from the week before, led by a sharp decline in power burn demand. which was partially offset by gains in industrial and LNG feedgas demand, according to S&P Global Platts Analytics. Total supplies held steady, falling 200 MMcf/d to average 91.8 Bcf/d for the week.
Downstream, total demand was down 3.9 Bcf/d week on week. Power burn demand fell by nearly 5 Bcf/d on the week, though increased deliveries to industrial end users, 300 MMcf/d, and to LNG liquefaction facilities, 700 MMcf/d, helped stem the demand losses.
Storage volumes now stand 608 Bcf or 22% above the year-ago level of 2.724 Tcf and 443 Bcf or 15% higher than the five-year average of 2.889 Tcf.
Forward NYMEX Henry Hub prices were mostly flat following a slightly larger-than-expected inventory increase reported by the EIA. The September contract added 1 cent to $2.16/MMBtu in trading following the release of the weekly storage report. Balance-of-summer NYMEX has seen notable strengthening in the last week and a half, rising from $1.88/MMBtu at the beginning of August to current levels of around $2.15. The winter strip, November through March, has strengthened to a lesser degree, narrowing spreads from summer to winter to around 70 cents from 90 cents for most of the summer to date.
S&P Global Platts Analytics' supply and demand model currently forecasts a 40 Bcf injection for the week ending August 14. This would lower the surplus to the five-year average by 4 Bcf.
Total supplies are up 900 MMcf/d on the week to average 92.7 Bcf/d. Production increases occurred primarily in Oklahoma, which increased 400 MMcf/d. This was bolstered by higher receipts in the Northeast and Texas as well which added a combined 400 MMcf/d.
Downstream, total demand has risen even more, as the power sector has taken an additional 2.2 Bcf/d of demand compared with the week ended August 7. LNG feedgas demand also continues its recovery, growing by 500 MMcf/d over the previous week.