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Analysts expect US natural gas storage build to measure 33% below five-year average

Highlights

Survey calls for 51 Bcf injection

Maintenance lowers US May output

Houston — US natural gas storage fields likely injected another below-average volume for the week ended April 30 as the deficit to the five-year average looks to widen in the week ahead, providing support to a Henry Hub summer strip pushing above $3/MMBtu.

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The US Energy Information Administration is expected to report a 51 Bcf injection for the week-ended April 30, according to a survey of S&P Global Platts survey of analysts May 4. Responses to the survey ranged from a 42 to a 66 Bcf injection. The EIA plans to release its weekly storage report May 6.

US supply-demand balances essentially reversed course in the week ending April 30, with a 6 Bcf/d decrease in demand undoing the previous week's cold-weather driven increase, while supplies recovered by about 600 MMcf/d on higher production marks in the Northeast and Southeast, according to S&P Global Platts Analytics.

As a result, balances were indeed looser week over week, with a 51 Bcf injection forecast representing a nearly fourfold increase from the week ended April 23. However, the longer-term trend toward tighter fundamentals is more apparent when looking at its historical context. A 51 Bcf injection is about 33% lower than the five-year average 81 Bcf build and is only half the year-ago injection of 103 Bcf reported for the same week.

Compared with a year ago, the market is significantly tighter as total US demand has increased by roughly 7.4 Bcf/d year on year, while total supply is up only 100 MMcf/d.

A 51 Bcf injection would expand stocks to 1.949 Tcf. Total volumes would measure 70 Bcf below the five-year average, and the deficit to 2020 would increase to 354 Bcf.

The expected below-average storage build is further evidence of the widespread tightening happening among US balances, which is being driven by several factors, including sub-par production performance and robust export demand, both via LNG feedgas deliveries and pipeline exports to Mexico, according to Platts Analytics.

The NYMEX Henry Hub June contract remained static at $2.96/MMBtu during trading on May 4, which represents a gain of 10 cents over the past week. The summer strip, June through October, slid 1 cent to $2.99/MMBtu. The upcoming winter strip is slightly higher at $3.15/MMBtu.

Platts Analytics' supply and demand model expects a 67 Bcf injection, 15 Bcf below the five-year average, for the week ending May 7.

US May production looks to be somewhat affected by pipeline maintenance. Maintenance along Transco's Leidy Line in the Northeast, which began on May 1, and is scheduled to last the entire month, has lowered total Northeast production by around 500 MMcf/d so far, according to Platts Analytics.

Although the maintenance is a long distance from the demand centers along the US Gulf Coast, prices around FGT Zone 3, Houston Ship Channel and Columbia Gulf Mainline all saw significant strength on trading for May 3. The lower supply coupled with a forecast increase of around 500 MMcf/d to Southeast demand this week pushed the pricing hubs higher by 12 to 17 cents.

Notably, outright prices at Houston Ship Channel pushed above $3/MMBtu for the first time since the February freeze caused by Winter Storm Uri. For the remainder of the month, the overall tighter supply market is expected to cause some more significant price movements, especially around the higher demand hubs along the US Gulf Coast.