EIA expected to report a 61 Bcf build into weekly storage as power burn soars: survey

The US Energy Information Administration is expected to report a 61 Bcf injection to US gas storage for the week ended July 8, according to a survey of analysts by S&P Global Commodity Insights.

Responses to the survey were reported in a wider range this week with expected injections ranging from 38 Bcf to 77 Bcf. The EIA plans to release its weekly storage report on July 14 at 10:30 am ET.

The anticipated 61 Bcf injection would come in higher than both the five-year average injection of 55 Bcf and the 49 Bcf observed during the corresponding week in 2021. US storage levels would climb to 2.372 Tcf, narrowing the deficit to the five-year average to 316 Bcf, while closing the gap to the corresponding week in 2021 to 249 Bcf. In percentage terms, a 61 Bcf weekly build would reduce the deficit to the five-year average to 11.8% from 12.2% and narrow the deficit to the corresponding week in 2021 to 9.5% from 10.1%.

Surging gas demand

While the forecast net injection for the week ended July 8 is higher than both the year-ago and five-year average builds, the survey results demonstrate a recalibration of expectations toward the lower side, after the most recent weekly storage report came in well below analyst forecasts.

On July 7, the EIA reported a net build of 60 Bcf for the week ended July 1, surprising many market watchers who expected a larger build in the 70s Bcf. The NYMEX Henry Hub August contract spiked 14% in reaction.

Soaring gas-fired power demand has driven the lower builds, as cooling demand pushes power burn to outpace recent production growth. Platts Analytics data shows that US gas-fired power demand increased 1.6 Bcf/d for the week ended July 8 compared with the week ended July 1, while gas production fell around 100 MMcf/d in the same time frame.

US power sector demand for gas has been insatiable month to date, coming in 5.9 Bcf/d higher so far this July than last.

Gas futures search for direction

On July 12, the Henry Hub prompt-month settled at $6.163/MMBtu on July 12 – down 26.3 cents from the prior-day settlement, data from CME Group showed.

The prompt-month has zigzagged around the $5.00-$6.50/MMBtu range for the last nine trading sessions, as the market weighs the impact of soaring gas-fired power demand against the extra supply in the market from the Freeport LNG outage. This uncertainty is reflected in wider daily trading ranges, which have averaged 53 cents so far in July compared with 16 cents for the same days last year.

Commodity markets in general have retreated over the last several weeks, with analysts pointing to recession fears as driving an increasing de-linkage between fundamentals and price movements.

Outlook

Looking ahead, S&P Global Commodity Insights' supply-demand models forecasts a net injection of 34 Bcf for the week ending July 15, below the 50 Bcf observed in the 2021 corresponding-week injection and below the five-year-average injection of 41 Bcf.

The below-normal build predicted for the week in progress reflects record-breaking heat in Texas that has shattered multiple daily peakload records, with below-average wind generation increasing the call on gas to meet cooling needs.