The U.S. Energy Information Administration (EIA) reported a 58 Bcf injection into natural gas storage inventories for the week ending Aug. 7, coming in on the high end of wide-ranging estimates but still sparking a small initial rally in futures prices.
In the minutes leading up to the 10:30 a.m. ET storage report, the September Nymex gas futures contract was trading at $2.175, up 2.3 cents from Wednesday’s close. As the EIA figure crossed trading desks, the prompt month climbed to $2.182.
“It was a very mild week with good wind,” and a 58 Bcf injection is “right on neutral” from a supply/demand perspective given the weather, said one market observer on The Desk’s online energy platform Enelyst.
The analyst noted that last September and October, the gas market saw injections that were 4 Bcf/day loose, “or worse.” This September and October, however, liquefied natural gas is rebounding and production is starting to roll over. “There will be a big year/year difference.”
Analyst Stephen Schork also pointed out that “Wall Street loves natty right now. Funds are holding their largest bull position since optionsellers.com fiasco in November 2018.”
Enelyst managing director Het Shah, who had pegged the build at 59 Bcf, said the initial price reaction didn’t “make sense” but noted that it didn’t take long before a correction got underway. “The prompt month is coming back to reality. Some algos messed up at 10:30 a.m.”
By 11 a.m., the September Nymex contract was back at $2.160, up only eight-tenths of a cent day/day.
Ahead of the EIA report, a Bloomberg survey of analyst estimates ranged from a build of 42 Bcf to as high as 65 Bcf, with a median of 56 Bcf. A Reuters poll had a tighter range and a median injection of 57 Bcf, while a Wall Street Journal poll landed on a build of 56 Bcf. NGI projected a 54 Bcf injection.
Last year, the EIA recorded a 51 Bcf injection for the similar week, while the five-year average stands at 44 Bcf.
Broken down by region, the Midwest added 26 Bcf into inventories, and the East added 20 Bcf, according to EIA. Mountain and Pacific stocks each grew by less than 5 Bcf, while the South Central region reported a net injection of 5 Bcf, which included a 1 Bcf build into salt facilities and a 5 Bcf build in nonsalts.
Shah questioned whether the market would be “hitting storage ratchets” in late September given that East and Midwest inventories still were sitting at their highs. “If so, we could see cash in those markets fall apart.”
Total working gas in storage as of Aug. 7 stood at 3,332 Bcf, which is 608 Bcf higher than last year at this time and 443 Bcf above the five-year average of 2,889 Bcf, EIA said.
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