US gas storage fields post second consecutive above-average weekly injection

US natural gas storage fields injected just above the five-year average for the week ended May 28, but below-normal builds are expected in the weeks ahead as gas-fired power generation accelerates and LNG exports outpace June expectations.

Storage inventories increased 98 Bcf to 2.313 Tcf, the US Energy Information Administration reported June 3.

The build proved greater than the 87 Bcf addition expected by an S&P Global Platts' survey of analysts, but just above the five-year average build of 96 Bcf, according to EIA data. It was the second consecutive week the injection was more than most market expectations.

Storage volumes now stand at 386 Bcf, or 41%, less than the year-ago level of 2.699 Tcf, and 61 Bcf, or 2.6%, less than the five-year average of 2.374 Tcf.

The NYMEX Henry Hub July contract dipped 2 cents to $3.05/MMBtu in trading on June 3. Summer prices have given back nearly half of the 12 cents of gains picked up on June 1, following reports of a systemwide capacity reduction on Texas Eastern Transmission that is expected to reduce supplies in the US Gulf Coast area for a still undetermined length of time.

Even so, the summer strip is sitting well above the $3 level after dipping below it for a week in late May. Capacity reductions notwithstanding, doubts about the tightness in supply-demand balances continue to swirl, particularly as storage inventory builds repeatedly have come in higher than market surveys anticipate, according to Platts Analytics.

Platts Analytics' supply and demand model currently forecasts 75 Bcf injection for the week ending June 4, which would measure about 20 Bcf less than the five-year average.

Demand fundamentals for the week in progress have unwound the previous week's gains in power generation demand while also seeing a recovery in residential and commercial and industrial loads following losses the week before.

Total supplies are down roughly 900 MMcf/d on the week, for an average 94.4 Bcf/d, as offshore production has extended last week's decline by another 200 MMcf/d while net Canadian imports have also pulled back an additional 600 MMcf/d.

Downstream, power demand has fallen 2.1 Bcf/d while res-comm and industrial are up by a combined 1.7 Bcf/d. Taken together with a roughly 800 MMcf/d increase in export demand—both LNG feedgas and exports to Mexico—total demand is up by a net 400 MMcf/d week over week. Altogether, balances have trended 1.3 Bcf/d tighter from the reference week, though this is being driven mostly by weaker supply rather than stronger demand.