With natural gas market observers continuing to digest the implications of another larger than normal weekly inventory build, futures were trading close to even early Friday. The June Nymex contract was off 0.3 cents to $2.586/MMBtu shortly after 8:30 a.m. ET.
The Energy Information Administration (EIA) reported a 123 Bcf injection into U.S. gas stocks for the week ended April 26, topping both consensus estimates and historical norms. Last year, EIA recorded a 50 Bcf build for the period, and the five-year average is a 70 Bcf injection.
Total Lower 48 working gas in underground storage stood at 1,462 Bcf as of April 26, 128 Bcf (9.6%) above year-ago stocks but 316 Bcf (minus 17.8%) below the five-year average, according to EIA.
Genscape Inc. viewed the 123 Bcf injection as about 3 Bcf/d looser than the five-year average.
“It was the largest weekly build since May 2015 and the second biggest in at least the past 10 years,” Genscape senior natural gas analyst Rick Margolin said.
Analysts with Tudor, Pickering, Holt & Co. (TPH) attributed the “outsized build” in part to below average heating demand for the period, which dropped residential/commercial demand by 3.5 Bcf/d week/week.
“On a weather-adjusted basis, the market has been about 5 Bcf/d oversupplied for the balance of April, but we note demand was negatively impacted” by maintenance affecting Mexican pipeline and liquefied natural gas (LNG) export volumes during the month, TPH analysts said. “Current flow data has combined Mexican pipeline and LNG exports back in the 9.8 Bcf/d range compared to an average of 8.7 Bcf/d in April.
“Our preliminary numbers for next week show a build much more in-line with the five-year average of 70 Bcf, as cooling demand in the south and heating demand in the north drove above-normal demand in both the power and residential/commercial sectors.”
Recent price action in the futures market points to a combination of bullish sentiment countered by “strongly bearish” fundamentals, according to EBW Analytics Group CEO Andy Weissman.
“The natural gas market continues to act as if it wants to move higher, with the June contract selling off only modestly despite a massive 123 Bcf injection -- far above market expectations or any previous April injection,” Weissman said. “This bullish sentiment could help the June contract hold support today and early next week. Additionally, next week’s reported injection, for the storage week that is just ending, could be 30 Bcf or more below yesterday’s report.”
As for the latest forecast outlook, the overnight guidance added back some demand that had been lost in Thursday’s model runs, according to NatGasWeather. Demand gains overnight stemmed primarily from stronger cooling across the northern and central United States for late next week, as well as some additional heat in the southern part of the country.
“It’s still far from being considered a bullish pattern, just not quite as bearish as Thursday’s data,” NatGasWeather said. Even with heating degree days and cooling degree days totaling slightly above 30-year averages for late next week into the following weekend, “weekly builds will continue to print larger than normal, further improving deficits in supplies.”
Soon after 8:30 a.m. ET, June crude oil futures were trading 32 cents higher at $62.13/bbl, while June RBOB gasoline was up 1.0 cent to $2.0283/gal.