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US natural gas in underground storage set to expand by 61 Bcf: survey

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US natural gas in underground storage set to expand by 61 Bcf: survey

Highlights

Will shrink deficit to five-year average

Midwest likely to feature largest injection

Denver — Analysts expect US natural gas in storage to increase by 61 Bcf, or 10 Bcf more than the five-year average, as onshore production surged during the week ended August 16.

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The US Energy Information Administration is expected to report a 61 Bcf injection for the week ended August 16, according to a survey of analysts by S&P Global Platts. Responses to the survey ranged for an injection of 54 Bcf to 65 Bcf. EIA plans to release its weekly storage report on Thursday at 10:30 am EDT.

A 61 Bcf injection would be more than the 47 Bcf build in the corresponding week last year, as well as the five-year average injection of 51 Bcf. An injection within expectations would increase stocks to 2.799 Tcf. The deficit versus the five-year average would decrease to 101 Bcf and the surplus to last year would expand to 371 Bcf.

The build looks to be more than the week prior, when the EIA reported a 49 Bcf injection, as US production remained strong for the week ended August 16.

US Onshore production continued to set record highs, gaining 0.3 Bcf/d from the Northeast and Southeast week over week, averaging 87.3 Bcf/d for the reference week, according to S&P Global Platts Analytics. Warmer temperatures across the Lower 48 softened estimated power burn demand by about 6 Bcf, which was partially offset by a corresponding 2 Bcf gain in residential and commercial demand.

Fundamentals for this Thursday's EIA report remain bearish, but the Mexican government and pipeline operators have reportedly reached an agreement this week that will provide some much-needed southbound export capacity for the over-supplied US gas market and support gas prices through September, according to Platts Analytics.

Once again, the EIA's Midwest region is poised to post the largest net injection for the week at 31 Bcf, according to Platts Analytics. The East region should post the next highest build at 24 Bcf.

Midwest stockpiles continue to close in on the five-year average inventory amid strong injections in August. Midwest inventories currently sit at 666 Bcf, which is more than 70 Bcf above last year's mark and only 32 Bcf less than the five-year average, according to Platts Analytics.

The Midwest has injected roughly 80 Bcf this month, or about 4.2 Bcf/d. This contrasts with a five-year average injection rate of 3.7 Bcf/d. After starting the summer close to 80 Bcf below the five-year mark, injections have accelerated throughout the summer to narrow that deficit.

A Platts forecast published last month anticipates Midwest inventories will finish October with 954 Bcf in the ground, more than 50 Bcf above last year. This will leave the Midwest well supplied entering the winter, especially with more inbound pipeline capacity from the Northeast via pipelines like Nexus. As such, price premiums at Chicago and other Midwest demand centers this winter are expected to be softer year over year.

An early forecast by Platts Analytics shows storage levels increasing by 57 Bcf for the week in progress, which is equal to the five-year average. The following week looks to add an even more bearish build at 73 Bcf.

-- Brandon Evans, bevans@spglobal.com

-- Edited by Christopher Newkumet, newsdesk@spglobal.com