As analysts continued to mull the balance implications of the latest government inventory data, natural gas futures remained range-bound in early trading Friday. The July Nymex contract was off 1.7 cents to $1.796/MMBtu at around 8:45 a.m. ET.
The U.S. Energy Information Administration (EIA) on Thursday reported an injection of 93 Bcf into storage for the week ending June 5. The figure was well below the previous week’s inventory build of 102 Bcf and lower than the 107 Bcf increase recorded in the same week a year earlier.
The print came in slightly below the five-year average build of 94 Bcf and was in line with expectations. The build increased inventories to 2,807 Bcf, above the year-earlier level of 2,059 Bcf and the five-year average of 2,386 Bcf, according to EIA.
“Weather demand has been strong so far this injection season as cumulative degree days sit 23% above norms, yet storage has built 26% ahead of a normal pace, indicating demand destruction has outpaced supply drops,” analysts at Tudor, Pickering, Holt & Co. (TPH) said of the latest inventory figures. “As it stands, we currently see the market about 1 Bcf/d oversupplied on a weather-adjusted basis.”
So far in June the market has been “bouncing between” $1.75 and $1.85, with traders searching for a potential catalyst that would break prices out of this range, according to the TPH team.
“In terms of the catalyst that might move price outside its recent band, we think the continued return of associated volumes will likely be that event,” the analysts said. “Pipe scrapes show Permian Basin volumes up about 0.5 Bcf/d over the past two weeks, but on aggregate we expect there could be up to 2 Bcf/d of associated gas still to return, plus about 0.25 Bcf/d from the Gulf of Mexico.”
Genscape Inc. analysts estimated that this week’s print implies the market balance was close to neutral when compared to degree days and normal seasonality, coming in about 0.3 Bcf/d loose versus the prior five-year average.
“This week’s reported injection was around 0.9 Bcf/d looser than last week, driven by a 0.9 Bcf/d week/week reduction” in liquefied natural gas (LNG) feed gas demand, Genscape analyst Eric Fell said.
Storage inventories in Europe remain more than 1 Tcf above the five-year average, but injections have been 5 Bcf/d below the five-year average over the past two weeks, according to Fell, who said “large reductions” in supply from both LNG and pipelines have “significantly tightened balances” on the continent.
“A minus 5 Bcf/d pace versus the five-year average would keep European storage below max capacity and would actually put European levels below last year at the end of October,” Fell said.
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