With a lighter-than-average inventory build this week leaving traders to contemplate stubborn storage deficits following a hot summer, natural gas futures continued to rebound in early trading Friday. The October Nymex contract was up 19.6 cents to $8.111/MMBtu as of around 8:55 a.m. ET.
The Energy Information Administration (EIA) on Thursday reported a 54 Bcf injection into U.S. natural gas storage for the week ended Sept. 2. The print was in line with pre-report expectations and lighter than the five-year average injection of 65 Bcf.
Total Lower 48 inventories stood at 2,694 Bcf as of Sept. 2, 349 Bcf (minus 11.5%) below the five-year average, according to EIA.
“This week’s reported injection was 7 Bcf lower than last week despite a notable increase in nuclear/renewable generation of 10 GW week/week and an increase in net supply of more than 9 Bcf,” Wood Mackenzie analyst Eric Fell said of the latest EIA print.
The reported injection implies neutral balances versus the prior five-year average when compared to degree days and normal seasonality, according to Fell.
“The last 12 storage weeks since Freeport LNG went offline have averaged very close to neutral/normal (tight by 0.1 Bcf/d), with a cumulative storage injection 34 Bcf less than the five-year,” the analyst said. “…The 12 weeks prior to Freeport going offline were also tight by an average of 0.1 Bcf/d. The U.S. gas market has maintained a similar weather-adjusted storage trajectory despite losing 2 Bcf/d of feed gas demand since June 8.”
Meanwhile, looking at the latest weather outlook, demand is expected to ease lower over the next few days as the heat wave impacting California and the Mountain West subsides, according to NatGasWeather.
“National demand is expected to be light next week as a series of weather systems track across much of the U.S., resulting in comfortable highs of 60s to 80s besides locally hotter 90s over Texas, Florida and Southwest deserts,” NatGasWeather said. “The overnight data maintained a very warm pattern returning Sept. 16-22 as strong upper high pressure rules most of the U.S. besides West Coast states. However, this late in the season” high temperatures should be “mostly comfortable” across much of the country during this time frame.
Coming off heavy selling over the past week, “bulls bought the dip” to rally prices back above $8 in after-hours trading, the firm observed.
“To the bullish side remains tight U.S. and global supplies,” NatGasWeather said. “To the bearish side remains weak” liquefied natural gas feed gas demand “due to Freeport LNG remaining offline, as well as healthy U.S. production near 98 Bcf/d.”
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