US natural gas storage deficit continues to climb as power demand heats up

Denver — The US gas storage deficit to last year and the five-year average continued to climb, while warmer weather setting in across the US diminished the chances for bulky builds as gas-fired power demand grows.

The US Energy Information Administration is expected to report a 67 Bcf injection for the week-ended May 14, according to a survey of analysts by S&P Global Platts. Responses to the survey ranged from a 63 Bcf to 78 Bcf injection.

A 67 Bcf injection would prove less than the five-year average of 86 Bcf build and last year's 84 Bcf addition. It would expand stocks to 2.096 Tcf. US storage would measure 91 Bcf below the five-year average, and the deficit to 2020 would expand to 395 Bcf.

The EIA plans to release its weekly storage report on May 20 at 10:30 am ET.

Inventories continue to trail behind historical metrics, both from a five-year average and a year-ago perspective, reflecting the tighter markets this year, which have been driven by colder weather and robust export demand in the face of sputtering production levels, according to S&P Global Platts Analytics.

Cold weather lasting through the spring has effectively raised the bottom on demand through the early shoulder season, and with weather now turning warmer and elevating cooling demand, opportunities for large weekly builds are growing thin.

Since the beginning of the injection season, inventories have risen by nearly 100 Bcf less than they have on average over the last five years, a deficit that may continue to mount in the months ahead amid tepid production growth and projections for robust demand to continue.

US production has slipped to 90.4 Bcf/d in preliminary estimates driven by the declines primarily in the Northeast, Platts Analytics data demonstrated. Production fell to 32.8 Bcf/d in the Northeast, with the day-on-day declines hitting the Pennsylvania Northeast Dry region across numerous pipelines.

Meanwhile, total US demand has remained steady at 82.3 Bcf/d despite a second consecutive day of lower LNG feedgas. Feedgas demand has fallen nearly 900 MMcf/d since May 16, driven by declines at Corpus Christi and Elba terminals.

Power burn has more than offset those declines, up to 28.8 Bcf/d on the preliminary estimate for May 18, driven by gains across the Northeast, Southwest and Southeast. Power burns are expected to continue to grow up to 30.4 Bcf/d for the week ahead.

The NYMEX Henry Hub June contract contracted 10 cents at $3.01/MMBtu during trading on May 18.

Platts Analytics' supply and demand model expects a 94-Bcf injection for the week ending May 21, which is nearly in line with the five-year average change. The week ending May 28 calls for an injection 20 Bcf below the five-year average due to the effect of higher gas-fired power demand and lower US-level production.