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US gas storage forecast to add triple-digit injection as season winds down

Highlights

Analysts expect 111 Bcf build for week ending Oct. 1

Would mark second largest addition of year

US natural gas storage fields have possibly posted the second triple-digit build of the year as milder weather dims demand, but key regions remain undersupplied, propelling prices higher, as the final full month of the injection season begins.

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The US Energy Information Administration is expected to report a 111 Bcf injection for the week ended Oct. 1, according to a survey of analysts by S&P Global Platts. Responses to the survey ranged from injections from 99 Bcf to 120 Bcf.

It would rank as the second largest injection of the year, trailing only the 115 Bcf build reported in May. It would be the second triple digit build of the current season. Over the three years prior, an average of five triple-digit injections were reported.

A 111 Bcf injection would surpass the five-year average build of 81 Bcf and last year's 75 Bcf addition during the corresponding week. It would expand stocks to 3.281 Tcf. The deficit to the five-year average would decrease to 183 Bcf, and the deficit to 2020 would drop to 539 Bcf.

Over the past five years, US storage totals have typically surpassed 3.2 Tcf by early September, which leaves the current total nearly one month behind schedule as less than 30 days remain in the current injection season, according to EIA data.

Storage fields in multiple regions have accelerated injection activity in an attempt to build supply before the high demand heating season begins, according to data from S&P Global Platts Analytics.

For example, injections in the Midwest have picked up to begin October as the region attempts to close the deficit to last year in the final month leading up to the winter withdrawal season. Midwest inventories sit just shy of 900 Bcf, slightly below the five-year average and 70 Bcf less than 2020's mark.

Injections have climbed to an average of 4.3 Bcf/d to start the month, which is more than double the rate witnessed last October. The uptick in injections appears unrelated to demand as power burns are tracking relatively in line with September. However, the region has sharply reduced outbound flows to Eastern Canada this month, with throughput averaging 1.3 Bcf/d to begin October, 500 MMcf/d lower than last month. Historically, the Midwest injects 100 Bcf in October, which if repeated this year, would leave inventories just below 1 Tcf exiting October.

Injections in the Pacific region, particularly in the SoCal Gas system, have also picked up this month. This past weekend injections reached as high as 192 MMcf/d, a dramatic swing from the 117 MMcf/d withdrawals recorded less than 10 days ago. These stronger injections may continue, as Los Angeles temperatures are forecast to drop by 5 degrees through the week ending Oct. 8.

The South Central region is expected to post a 39 Bcf injection for the week ended Oct. 1, according to Platts Analytics, which is nearly double the injection rate of the week prior.

The NYMEX Henry Hub November contract jumped 51 cents during the trade day on Oct. 5 to $6.28/MMBtu. The January contract was trading as high as $6.56. The lower regional demand would normally place downward pressure on prices. However, LNG export demand in the region remains strong at more than 10 Bcf/d since late September, with more upside left as Sabine Pass feedgas sits at 3.5 Bcf/d, 700 MMcf/d below nameplate capacity, according to Platts Analytics.

Platts Analytics' supply and demand model expects a 71 Bcf injection for the week ending Oct. 8, which would measure 8 Bcf less than the five-year average.

The EIA plans to release its weekly storage report on Oct. 7 at 10:30 am ET.