US natural gas storage fields look to add another above-average injection

US gas storage fields likely posted a build above the five-year average for the week ended July 23, but less than the week prior, as multiple regions are expected to show net withdrawals with about three months remaining in the injection season.

The US Energy Information Administration is expected to report a 40 Bcf injection for the week-ended July 23, according to a survey of analysts by S&P Global Platts. Responses to the survey ranged from a 33 to 48 Bcf injection. The EIA plans to release its weekly storage report on July 29.

A 40 Bcf addition would measure more than the five-year average build of 28 Bcf during the corresponding week and expand stocks to 2.718 Tcf. It would be the third-consecutive above-average injection. However, the weekly builds have not registered strong enough to make a serious dent in the lingering deficit.

Volumes would slide to 164 Bcf below the five-year average, and the deficit to 2020 would contract to 519 Bcf.

The week ending July 23 saw balances move tighter once again, particularly in the Southern US as demand was seen rising in both the Southeast and Southwest, according to S&P Global Platts Analytics. Weekly injection profiles remained relatively static across the EIA's East and Midwest storage regions.

The most notable change, and underpinning the drop in injections week over week, is the South Central region, where storage activity is expected to have moved deep into net-withdrawal territory after posting a 7 Bcf net injection the week ended July 23. Pacific region balances look to be looser week over week, with net withdrawals there showing signs of decline, going from 3 Bcf to 2 Bcf week over week.

The NYMEX Henry Hub August contract retracted during the trade day on July 27. It fell 11 cents to $3.99/MMBtu. The upcoming winter strip, November through March, plummeted nearly 15 cents to $4/MMBtu, which was still 9 cents more than one week prior as contracts shed some of the massive jumps made on July 26.

"There was a big run up this Monday that pushed the August contract up," said Phil Flynn with Price Futures Group. "There is usually a run on Monday, and then the forecast changes, and it comes back down. Nothing has really changed though. The weather forecast is still calling for it to be hot."

As the September contract begins to test $4/MMBtu, it might prove to be the floor rather than the ceiling as it becomes the prompt-month, Flynn added.

Platts Analytics' supply and demand model expects a 21 Bcf injection for the week ending July 30, which would be 9 Bcf less than the five-year average, expanding the deficit as three months remain in the injection season. The week after shows a 42 Bcf injection, which would match the five-year average.