As analysts highlighted evidence of potential regional storage constraints heading into the end of the injection season, natural gas futures extended the previous session’s losses in early trading Friday. The September Nymex contract was down 4.4 cents to $2.308/MMBtu at around 8:40 a.m. ET.
The Energy Information Administration (EIA) on Thursday reported a 43 Bcf injection into storage inventories for the week ending Aug. 14, lifting total working gas in storage to 3,375 Bcf. That is 595 Bcf higher than year-ago levels and 442 Bcf above the five-year average of 2,933 Bcf.
Analysts at Tudor, Pickering, Holt & Co. (TPH) said they’re keeping a close eye on regional stockpiles following some “interesting movements” in the latest EIA report.
“In the South Central region, inventories built by 4 Bcf, bucking the trend of seasonal draws, and five-year average builds from here on out would brush up against regional capacity by mid-October,” the TPH analysts said. “The Midwest reported a seasonally normal build of 24 Bcf but on this pace would exceed capacity by around 30 Bcf this fall.”
As for the EIA East region, strong cooling demand helped make the reported 12 Bcf build “constructive” compared to historical norms, but that’s likely to reverse for next week’s report amid declining power generation demand in the current week, according to TPH.
The Pacific region currently has the “lowest relative storage levels” and posted a 1 Bcf pull in the latest report. Another withdrawal is likely to follow next week after the extreme heat seen in Southern California this week, the TPH analysts said.
“However, as indicated by this week’s gas price spikes in Southern California, there is limited ability to flow incremental gas into the region, so the slack storage capacity is unlikely to be of much use in relieving full storage caverns east of the Rockies,” they said.
Meanwhile, as of early Friday trends in the major weather models were mixed over the previous 24 hours, with the American dataset “making another notable jump hotter” as its European counterpart shifted cooler, according to Bespoke Weather Services.
“Both ensembles still suggest a hot-dominated pattern, especially next week, where a couple of days can challenge daily records” for national gas-weighted degree day totals, Bespoke said. “The main divergence we see in the modeling comes in early September,” when the European dataset “shows a cooler trough diving into the Midwest,” while the American shows “a stronger hotter ridge over the eastern half of the nation.”
Also of note, two named tropical systems could impact U.S. interests next week, with potential implications for both production and demand, Bespoke said.
The National Hurricane Center (NHC) Friday was monitoring Tropical Depression (TD) Thirteen, churning east of the Northern Leeward Islands, and TD Fourteen, which was near Honduras.
After threatening islands in the Caribbean over the weekend, the first storm could reach the Florida coast by early next week.
TD Fourteen’s probable path could see the storm’s center land somewhere along the Texas or Louisiana coasts by next Tuesday or Wednesday, according to the NHC.
October crude oil futures were down 37 cents to $42.45/bbl at around 8:40 a.m. ET, while September RBOB gasoline was off fractionally to $1.2916/gal.
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