US gas stocks likely to increase more than normal as demand slides in August

Denver — After US natural gas in storage demonstrated slight, but steady, declines to the storage overhang in July, weakening demand points to larger injections for last week and the weeks ahead, slowing recent gains made to Henry Hub futures.

The US Energy Information Administration is expected to report a 51 Bcf injection for the week ended Aug. 7, according to a survey of analysts by S&P Global Platts, the leading independent provider of information and benchmark prices for the commodities and energy markets.

Average temperatures across the US fell 3 degrees week over week, particularly in the East and Midwest storage regions, helping push down power burn demand by nearly 5 Bcf/d, according to S&P Global Platts Analytics. The drop in power burn demand was somewhat offset by an uptick in LNG feedgas deliveries, which gained 700 MMcf/d week over week, hitting the highest levels since the start of July.

Responses to the survey were wide and ranged from an injection of 34 Bcf to 60 Bcf. The EIA plans to release its weekly storage report on Thursday at 10:30 am ET.

A 51 Bcf injection would match the addition in the corresponding week last year but measure more than the five-year average build of 44 Bcf. A build within expectations would increase stocks to 3.325 Tcf. The surplus to the five-year average would increase to 436 Bcf, and the overhang to 2019 would remain at 601 Bcf. The injection looks to be more than the 33 Bcf build reported for the week prior.

While production estimates in the Midwest and Southeast regions have seen some upward momentum through the first week of August, these small gains were offset by a 900 MMcf/d decline from Texas production, according to Platts Analytics. The recent Texas declines are largely maintenance related, and have already begun to come back online. However, the loss of supplies through the first half of August puts downward pressure on the end-October inventory levels.

The NYMEX Henry Hub September contract added 2 cents to $2.17/MMBtu during afternoon trading on Aug. 11.

Platts Analytics' supply and demand model expects an injection of 45 Bcf for the week ending Aug. 14. This would increase the surplus to the five-year average by 1 Bcf. Injections throughout the month are currently forecast to run nearly in line with the average.

In July, higher than expected power burn demand through some of the hottest weeks of the year resulted in the Lower 48 injecting near or below the five-year average. That trend began to shift for the first week of August and looks to continues through the month under current fundamentals.