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$3 in Play? Bullish EIA Storage Miss Stokes Rising Natural Gas Futures

The Energy Information Administration (EIA) reported a weekly storage injection that came in lower than most estimates and the five-year average, giving further momentum to a natural gas futures market already higher overnight on hotter weather trends.

EIA reported a net 96 Bcf injection into Lower 48 gas stocks for the week ending May 25, more than the 80 Bcf build recorded last year but less than the five-year average 97 Bcf injection.

As the figure crossed trading desks at 10:30 a.m. ET, the July contract -- already up more than a nickel overnight with forecasters pointing to a more supportive long-range temperature outlook -- jumped another 3.5 cents to just under $2.990. By 11 a.m. ET, July was trading around $2.977, up about 9.2 cents from Wednesday’s settle.

Prior to the report, consensus estimates showed the market looking for a build notably larger than the actual figure.

A Reuters survey of traders and analysts on average had predicted a 102 Bcf injection, with responses ranging from 88 Bcf to 107 Bcf. A Bloomberg survey had produced a median 102 Bcf injection, with responses from 96 Bcf to 107 Bcf. ION Energy had called for a 105 Bcf build, while Price Futures Group had estimated a build of 101 Bcf. The Intercontinental Exchange EIA Financial Weekly Index settled Wednesday at an injection of 104 Bcf.

Bespoke Weather Services said the week’s build came in 6 Bcf below its estimate.

“We see this print as slightly bullish, with both noisy production and burn estimates indicating either burns were a bit more impressive or production recovered less than expected,” Bespoke said following the report’s release. “Either way, such a print puts $3 in play today and indicates a marginally tighter market than expected, which adds support as we were already rallying off impressive heat risks in the long-range.

“We do note that we are still solidly loose to the five-year average, and this print was a touch looser to even 2018 on balance, so with average weather the market has far to fall, but this print confirms we can run on heat.”

Total working gas in underground storage as of May 25 stood at 1,725 Bcf, versus 2,513 Bcf a year ago and five-year average inventories of 2,225 Bcf, according to EIA. Week/week, the year-on-year storage deficit shrank from 804 Bcf to 788 Bcf, while the year-on-five-year deficit increased slightly from 499 Bcf to 500 Bcf, EIA data show.

By region, 29 Bcf was injected in the East, followed by the Midwest, which saw a 27 Bcf build for the week. In the South Central, 26 Bcf was injected, with EIA recording a 9 Bcf build into salt and 18 Bcf into nonsalt. The Pacific saw a build of 8 Bcf, while 6 Bcf was refilled in the Mountain region, according to EIA.

 

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