Domestic production growth, incentivized by demand for U.S. LNG exports, has been a driving factor behind a run of outsized fall storage injections that has substantially driven down natural gas prices in recent weeks.
That’s according to a recent research note published by the Energy Information Administration (EIA), which found that U.S. storage injections totaled 427 Bcf during September. That was part of a run of five consecutive triple-digit injections, including a 129 Bcf build for the week ended Sept. 30 that was the second-largest weekly net injection on record for data going back to 1993, according to the agency.
“For the past five injection seasons, an average of 18% of natural gas injections in storage during the refill season occurred during September,” researchers said. “We currently estimate that this September natural gas injections into storage accounted for 21% of the total.”
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The hefty September injections occurred on a combination of weak domestic demand (owing to mild temperatures) and strong production, according to EIA.
“U.S. natural gas production has increased to meet growing demand for U.S. liquefied natural gas exports throughout the year,” EIA said.
Production averaged 92.9 Bcf/d in 2019 before falling in 2020 amid impacts from the Covid-19 pandemic, according to the agency. Domestic production has since climbed throughout 2021 and 2022.
“So far in 2022, dry natural gas production has averaged record volumes (over 96 Bcf/d), up 4% from last year and up 2.2% from 2019 annual production,” EIA said. “…Increases in natural gas production from shale plays have been driving growth in U.S. natural gas production this year and, so far, shale natural gas production has accounted for 78% of all U.S. dry natural gas production.”
The Haynesville Shale and the Permian Basin have been leading this growth, with both plays reaching record high output over the summer, according to EIA.
September production in the Haynesville was up 51% from September 2019 levels at an average of 13.7 Bcf/d, while Permian output was up 40% from September 2019 at 15.4 Bcf/d on average, the agency said.
“These plays’ infrastructure and proximity to the U.S. Gulf Coast’s LNG export terminals attract new operators, especially with relatively high summer spot prices at the U.S. benchmark Henry Hub,” researchers said.
EIA measured a 30% decline in Henry Hub spot prices during September, dropping from $9.38/MMBtu on average as of Sept. 1 to $6.40 on Sept. 30.
Spot prices haven’t fared much better during October, according to NGI’s Daily GPI historical data.
Day-ahead prices at Henry Hub averaged below $6 for most of the back half of the month, dropping as low as $4.430 on Oct. 21.
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