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June natural gas sinks as storage build beats expectations

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Essential Energy Insights - September 17, 2020

Essential Energy Insights September 2020

Rate case activity slips, COVID-19 proceedings remain at the forefront in August


June natural gas sinks as storage build beats expectations

Junenatural gas futures turned lower in the Thursday, May 5, trading session with lossesaccelerated by the report of a larger-than-anticipated build to natural gas inventoriesfor the week to April 29. The contract reached an intraday low of $2.073/MMBtu andfinished 6.5 cents lower at $2.076/MMBtu.

The U.S.Energy Information Administration reported a net 68-Bcf injection into the natural gas supply in the lastweek of April that was larger than market expectations coming into the day thatspanned builds of 56 Bcf to 75 Bcf, with a consensus outlook formed at a 66-Bcfbuild to stocks.

Alongwith its miss against expectations, the injection was above the five-year-averagebuild of 64 Bcf, but fell below the 77-Bcf injection reported during the same weekin 2015. The build still improved the working natural gas supply to 2,625 Bcf, some861 Bcf above the year-ago level and 836 Bcf above the five-year average storagelevel of 1,789 Bcf.

Comparedagainst the 73-Bcf injection reported in the previous week, the build implied aslower rate of inventory building, presumably the result of cooler weather in majorheat-consuming regions that bumped up heating demand during the last week of April.

"Wedoubt the data will drive a lasting shift in market views, as shoulder season demandsimply isn't that easy to pinpoint," Citi Futures analyst Tim Evans said ina note. "Overall, we continue to see relatively neutral storage flows in theweeks ahead, consistent with sideways price chop rather than a clear upward or downwardtrend."

As temperaturesshift closer to those associated with the spring, lingering heating demand shouldbe abolished ahead of a substantial ramp-up in cooling demand, but the latest revisionsto weather forecasts suggest ongoing demand uncertainty.

Boththe six- to 10-day and eight- to 14-day maps from the National Oceanic and AtmosphericAdministration show above-average temperatures in the East and West and averageor below-average temperatures across the country's midsection.

Thusfar, natural gas inventories are building at a slower rate than last year aheadof a summer expected to be exceedingly warm across the majority of the country,according to AccuWeather forecasts.

Combinedwith weather, the market continues to eye changes in natural gas production amida severely diminished drilling rigcount.

Day-aheadmarkets were predominantly lower amid demand outlooks reflecting weather changesto milder conditions across the country as the week moves closer to its end.

BenchmarkHenry Hub trades were about 5 cents higher in line with some early gains in naturalgas futures and with some lingering demand support. However, with temperatures risingin the Northeast and slipping in the West, most markets corrected lower.

At theTransco Zone 6 NY hub deals for Friday flow were done about 15 cents lower to anindex nearing $1.80. TETCO M-3 traded about 35 cents lower to an index near $1.50.In the central U.S., Chicago traded nearly 10 cents lower to an index near $2.00.In Texas, Waha traded more than 5 cents lower to an average around $1.90. At theRockies markets, CIG hub deals were lower by less than 1 cent, leaving the indexnear unchanged around $1.80, while across the West SoCal Border traded about 1 centlower to an average beneath $2.00 and PG&E Gate slipped more than 1 cent toan index near $2.10.

Market prices and included industrydata are current as of the time of publication and are subject to change. For moredetailed market data, including our power,naturalgas and coalindex prices, as well as forwardsand futures,visit our Commodities Pages. To view detailed EIA Weekly Natural Gas Storage data,go to our NaturalGas Storage Page.