Gas market experts are expecting a large gas storage injection for the week ending Sept. 5. Although storage injections have averaged 68 Bcf for the same week over the last five years and last week’s injection was only 70 Bcf, gas futures analyst Kyle Cooper of Citigroup is forecasting a 100 Bcf weekly number from the Energy Information Administration (EIA) this Thursday, and energy consultant Stephen Smith said he’s expecting a 95 Bcf weekly build.

“The last couple weeks of August were the hottest and the third hottest weeks of the summer, and that’s huge,” said Smith. “We had a 70 Bcf injection reported last week [for the week ending Aug. 29], which was normal, but we did it with massively hot temperatures.” Last week’s weather was much closer to normal, and as result, there should be significantly more gas available to put into storage, he said.

The EIA said in its latest storage report, that there was 2,389 Bcf of working gas in storage on Aug. 29, which was 175 Bcf less than the five-year average and 392 Bcf less than the same time last year. With nine weeks left in the traditional injection season, the industry needs to average about 68 Bcf/week to reach the 3,000 Bcf mark, which historically has been adequate to meet winter demand.

“We do believe injections in September will be quite large and keep the pressure on prices,” said Cooper. “Although sub $4 prices are not expected before the winter, rallies to the $5 level should be considered opportunities to acquire short positions.”

Smith said to expect $4-$4.50 average Henry Hub gas prices in October “and probably below $4 later this fall.” He said there is a 25-30 Bcf/weekly supply excess built into the market currently because of industrial demand destruction and fuel switching due to high gas prices, and because of the rising amount of liquefied natural gas (LNG) being pumped into the U.S. marketplace.

“The only way we’re going to restore balance here unless we get some extraordinarily cold fall weather or extraordinarily hot September is to knock that gas price down,” Smith said.

Gas demand has been lost because industrial producers of fertilizers and ammonia products have shut down due to high prices. Gas also has captured a lower share this summer of the power generation market because of lower priced oil on the East Coast and cheap coal, which always has a good year when gas prices are high.

But LNG also has been a factor on the supply side, Smith noted. LNG supply is “up sharply from year-ago levels, and that’s because we now have the Cove Point facility in Maryland operating…and the [Elba Island terminal] in Savannah operating,” he noted. “These are natural markets for Trinidad, which now has three LNG trains operating. Imports were running about 0.3 Bcf/d in March, went to 1.5 Bcf/d in June and now are even bigger. So in addition to the demand destruction…there’s also a supply factor going on.”

Higher LNG imports are probably here to stay. In addition, it is unlikely that the plants that have been shut down because of high gas prices will return quickly once prices fall.

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