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US natural gas storage injection season starts early with 14 Bcf build

Highlights

First net injection of the year arrives a week early

EIA revises prior week's draw by 4 Bcf

The first net injection of the year to natural gas stocks came one week earlier than normal because of the arrival of mild weather across much of the US, as the Energy Information Administration also revised the pull for the week prior down 4 Bcf.

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Storage inventories increased 14 Bcf to 1.764 Tcf for the week ended March 26 EIA reported the morning of April 1.

The injection was below the 19 Bcf build an S&P Global Platts' survey of analysts expected. It stood in contrast to historical draws of 20 Bcf and 24 Bcf reported during the same week a year ago and the five-year average, respectively, according to EIA data.

Storage volumes now stand 225 Bcf, or 11%, below the year-ago level of 1.989 Tcf and 36 Bcf, or 2%, below the five-year average of 1.8 Tcf.

The report also featured a revision to the week ended March 19 from a 36 Bcf to a 32 Bcf draw because of a discrepancy in the South-Central region's non-salt storage fields.

Gas demand for power generation in the Southeast and Texas averaged 11.1 Bcf/d in March, 2.2 Bcf/d below both February 2021 and March 2020, according to S&P Global Platts Analytics. Despite temperatures in the region averaging 2.5 degrees above normal, the lower burns mainly were driven by a rise in wind and coal to the generation stacks of the Electric Reliability Council of Texas and SERC Reliability Corporation.

In March 2020, gas accounted for 41% of ERCOT's generation stack, with wind at 26% and coal at 30%. This March, gas is down to 36% while wind and coal are up to 38% and 33%, respectively. For SERC, gas made up nearly 60% of total generation in March 2020 while coal was responsible for just 13%. This year, coal generation is up to 20%, while the gas share slid to 50%.

While wind generation relies on the weather, prices mainly dictate coal and gas generation and can explain some of the higher coal burns this year versus last year. Prices at the Henry Hub in Louisiana last March averaged $1.75/MMBtu while, this March, they have averaged $2.57/MMBtu, which has encouraged more coal generation.

The NYMEX Henry Hub May contract rose 2 cents to $2.63/MMBtu in trading following the release of the weekly storage report. The entire summer strip, May through October, also rose 2 cents to $2.72/MMBtu while the winter 2021-22 strip ticked up 1 cent to average $2.94/MMBtu.

Platts Analytics' supply and demand model currently forecasts a 25 Bcf net injection for the week ending April 2, compared with the five-year average build of 8 Bcf. Total demand has fallen more than 1.8 Bcf/d compared with the prior week. Much of the loss was witnessed within the residential-commercial sector, which fell over 2 Bcf/d. Power burns offset some of the weakness in res-comm — with burns growing about 600 MMcf/d compared with the prior week as coal-to-gas switching accelerated. On the supply side of the ledger, US production was roughly flat

The latest Platts Analytics projection has storage peaking at 3.5 Tcf in late October, which would measure more than 200 Bcf below the five-year average.

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