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US natural gas storage fields post another strong shoulder season build

Highlights

Storage slides to 24 Bcf above five-year average

Surplus likely to flip to deficit for week in progress

Denver — Above-average injections into US gas storage fields during shoulder season suggest stocks might fill early this year, presenting a possibly bearish market landscape this summer.

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Storage inventories increased 20 Bcf to 1.784 Tcf for the week ended April 2, the US Energy Information Administration reported April 8.

The build was less than the 27 Bcf injection expected by an S&P Global Platts' survey of analysts. It was also less than the 30 Bcf addition reported during the same week last year, but above the five-year average injection of 8 Bcf, according to EIA data.

Lower weather-driven demand pushed US residential-commercial consumption down almost 2 Bcf/d for the week ended April 2, according to S&P Global Platts Analytics. Despite reduced space heating, power loads increased week over week as modest cooling degree days drove some demand in the Southeast.

Higher total loads interacted with stronger renewable generation, though, pushing the call on thermal generation lower. Yet, despite the smaller call on thermal generation, US gas-fired generation gained nearly 800 MMcf/d, with gas' share of thermal generation growing by about 2% to average roughly 63.5%. Switching to supply, US production gained a modest 200 MMcf/d, while a softer call on Canadian inflows drove net imports lower by roughly 100 MMcf/d.

Storage volumes now stand 235 Bcf, or 11.6%, less than the year-ago level of 2.019 Tcf and only 24 Bcf, or 1.3%, less than the five-year average of 1.808 Tcf.

Natural gas prices saw some selling pressure with the May Henry Hub NYMEX contract falling to as low as $2.46/MMBtu on April 7. The weakness in price appears to be driven by a lack of bullish catalysts, as the market is entering a period in which loads are seasonally quite weak and demand is soft. As such, it appears NYMEX futures are largely being shaped by cash prices with Henry Hub spot prices clearing below $2.40/MMBtu on April 8.

The NYMEX Henry Hub May contract was at $2.51/MMBtu in trading following the release of the weekly storage report on April 8.

Platts Analytics' supply and demand model currently forecasts a 64 Bcf injection for the week ending April 9, which would flip the deficit to the five-year average to a surplus.

The inventory gains were concentrated in the South Central and Midwest regions, which each accounted for a little more than a third of the total volume change week over week. Mild shoulder season weather means temperatures are rising enough to cut residential and commercial demand, but not climbing high enough to provide offsetting gains to power burn.