Although most natural gas analysts expect an increase in US inventories slightly below the five-year average for the week ended June 11, production declines spread across multiple regions, combined with higher demand, look to expand the deficit in the weeks ahead.
The US Energy Information Administration is expected to report a 78 Bcf injection, according to a survey of analysts done by S&P Global Platts. Responses to the survey ranged from injections of 66 Bcf to 93 Bcf. The EIA plans to release its weekly storage report at 10:30 am ET June 17.
There are several complicating factors to this week’s survey, namely the pipeline outage on Texas Eastern Transmission and a surge in power generation demand amid an intense heat wave. US power burn demand was seen rising by a massive 7.4 Bcf/d week on week, according to S&P Global Platts Analytics. The gains occurred primarily in the Northeast, Southeast, and Midwest cell regions, tightening up balances across much of the US and driving less gas into storage, despite an increase in onshore production receipts week on week.
A 78 Bcf injection would be below the five-year-average build of 87 Bcf and the 86 Bcf injection in the same week a year ago. It would expand stocks to 2.489 Tcf. US storage would measure 64 Bcf below the five-year average, and the deficit to 2020 would expand to 391 Bcf.
The NYMEX Henry Hub July contract contracted fell 13 cents to $3.22/MMBtu during trading June 15, retracting from gains made earlier in the week, but still very high compared with recent historical prices. The prompt-month contract averaged $2.96/MMBtu in May, which was the highest monthly average since $3.11/MMBut in January 2019.
Platts Analytics’ supply-and-demand model expects a 58 Bcf injection for the week ending June 18, which would measure less than the five-year average of 83 Bcf.
Although the week ended June 11 showed production gains, those have vanished during the week in progress. US production fell for the third day in a row, dropping 1.4 Bcf/d to 88.9 Bcf/d June 15, its lowest level since the February freeze.
Declines were widespread but most notable in the Northeast and Texas. In the Northeast, production dropped 600 MMcf/d to 33.3 Bcf/d with declines spread across the tri-state producing area of Pennsylvania, Ohio, and West Virginia. In Texas, production dropped 400 MMcf/d to 21.9 Bcf/d June 15. Declines in Texas were spread across dry and associated gas plays, including the East Texas Haynesville and Midland Basin.
Prices across the Southwest experienced significant strength during trading June 14 as the SoCal border and El Paso Natural Gas South Mainline increased $2.86/MMBtu and $4.50/MMBtu on the day to settle at $6.50/MMBtu and $8.33/MMBtu, respectively for Gas Day 15. The large jump was driven by a heat wave rolling across the region, increasing power demand by 2 Bcf/d, or 55%, althrough the week starting June 14.
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