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Injection season continues into second week with call for 27 Bcf build: survey

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Injection season continues into second week with call for 27 Bcf build: survey

Highlights

Measures above five-year average gains of 8 Bcf

Henry Hub futures slide further

US gas storage fields likely posted a net injection roughly three times the five-year average for the second build of the year for the week ended April 2 with some regions on track for record volumes to be added underground during the month.

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The US Energy Information Administration is expected to report a 27 Bcf injection for the week ended April 2, according to a survey of analysts by S&P Global Platts. Responses to the survey ranged from a 15-33 Bcf build.

A 27 Bcf injection would be less than the 30 Bcf build reported in the corresponding week last year but more than the five-year average addition of 8 Bcf. An injection within expectations would expand stocks to 1.791 Tcf. The deficit to the five-year average would decrease to only 17 Bcf, and the deficit to 2020 would increase to 228 Bcf.

The NYMEX Henry Hub May contract fell 5 cents at $2.46/MMBtu during trading on April 6, which was 16 cents down from the week prior. The entire summer strip declined by an average of 4 cents $2.59, 27 cents below the Henry Hub 2021-22 winter strip.

Platts Analytics' supply and demand model expects a 65 Bcf injection for the week ending April 9. It would measure well above the five-year average gain of 26 Bcf. The following week points to a 70 Bcf build, which would register nearly double the five-year average. The EIA plans to release its weekly storage report April 8 at 10:30 am ET.

Midwest US inventories are pushing new year-on-year gains, presenting downside risk to injections and prices later this season. Temperatures in the Midcon Producing averaged 57 degrees Fahrenheit so far this month, 8 degrees above the five-year average. This milder-than-normal weather has reduced both residential and commercial demand and gas-fired power generation.

Total demand averaged just 3 Bcf/d, 381 MMcf/d below forecasts and 704 MMcf/d below this time last April, according to Platts Analytics. As such, just under a week into the summer injection season, injections are pushing 1.1 Bcf/d, 574 MMcf/d above this time last April and the strongest April injections, month to date, in 11 years.

Inventories in the Midcon Producing now stand at 153 Bcf, 25.9 Bcf above last year. While Platts Analytics forecast the region would finish the month with 173 Bcf in storage, should this injection rate continue, the region would have more than 180 Bcf by the end of the month. This would weaken injection demand later in the summer and provide downside risk to regional prices.

However, if the declines in US onshore production recorded on April 6 remain, the month might not see record volumes of gas placed into storage. Onshore production fell to 88.9 Bcf/d on April 6, according to Platts Analytics. Total US modeled production, including offshore, fell 1.3 Bcf/d to 91.6 Bcf/d.

Although subject to intraday revisions, the day-on-day declines were evenly spread out with 400 MMcf/d shed from both Texas and the Northeast while the Southeast slid by 300 MMcf/d. In the Northeast, initial production fell to 33 Bcf/d after averaging 33.5 Bcf/d the past four days. Declines were mainly concentrated in the dry gas plays of northeastern and southern Pennsylvania.