US natural gas storage climbs 53 Bcf to 1.45 Tcf, pausing NYMEX futures rally

US working gas inventory registered its first above-average build of the season in mid-April, helping to narrow this season's lingering storage deficit while pumping the brakes on a NYMEX gas futures rally.

The US Energy Information Administration announced a surprisingly large 53 Bcf injection to US storage stocks April 21 for the week ending April 15 in its third reported inventory build of the season.

The injection was 22 Bcf above what S&P Global Commodity Insights' survey of analysts expected. The survey called for a 31 Bcf addition to stocks in the second week of April. The injection also overshot the survey's highest projected build for the week, which had called for a 51 Bcf addition to stocks.

The oversized injection lifted US working gas inventories to 1.45 Tcf in the week ended April 15. The storage deficit narrowed as stocks climbed to 428 Bcf, or about 23%, below the year-ago level of 1.878 Tcf and 292 Bcf, or almost 17%, below the five-year average of 1.742 Tcf, EIA data showed.

Immediately following the EIA storage report's release, NYMEX Henry Hub prompt-month futures shed 15-20 cents, dipping as low as $6.70/MMBtu in early trading, CME Group data showed.

While the first bearish injection of the summer season has given pause to the futures rally, this season's storage deficit could persist into the summer months if lingering heating demand is quickly replaced by gas-fired electric cooling—a possible scenario that short-term and seasonal weather forecasts suggest.

Weather

Over the next eight to 14 days, unseasonably cool weather across the US Northeast and the Upper Midwest is expected to keep average population-weighted temperatures in both regions to a chilly 56 degrees Fahrenheit, according to recent forecasts from the US National Weather Service and S&P Global Commodity Insights.

A longer-range weather service forecast shows nearly the entire continental US, except the Upper Midwest, at risk for above-average temperatures in May, June, and July. The three-month outlook, published April 21, shows a concentrated risk for hotter weather across must the west, including Texas.

As Appalachian Basin coal prices continue to rise, trading at over $140/st this month, S&P Global analysts are now also anticipating many dual-fuel generators to switch more baseload power to gas this summer—potentially adding further upside for power burns this season. During the peak cooling months from June to August, generators are expected to burn an average of 39 Bcf/d, outpacing last summer and trending about 3% shy of the 2020 season's record of a 40.3 Bcf/d average for the three months.

Outlook

According to an updated storage forecast that S&P Global published April 21, US inventories are likely to rise just 34 Bcf during the week in progress, undershooting the five-year average and expanding the deficit. If accurate, inventories would rise to 1.484 Tcf in the week ended April 22, leaving US gas storage at its largest deficit yet this year of 311 Bcf below the historical average.

Despite the drop in NYMEX Henry Hub prompt-month prices April 21, futures traders continued to acknowledge the potential supply risks this summer and over the balance of the year with the June-through-December 2022 contracts all pricing comfortably above $7/MMBtu, CME Group data showed.