The Energy Information Administration (EIA) reported a much larger-than-expected 74 Bcf injection into natural gas storage inventories for the week ending June 17.
The high-side surprise sent futures prices, already sharply lower day/day early Thursday, down several more cents as the market got the first glimpse of the impact softer liquefied natural gas (LNG) demand would have on supply.
The July Nymex futures contract was trading at around $6.640/MMBtu in the minutes leading up to the EIA report. As the print crossed trading desks, the prompt month plunged to $6.480. By 11 a.m. ET, July futures had sunk to $6.259, off a whopping 59.9 cents from Wednesday’s close.
“Down, down and away,” said a market observer participating on The Desk’s online energy chat Enelyst.
The biggest miss, according to Enelyst managing director Het Shah, was in the South Central region. Nonsalt facilities posted a 16 Bcf increase in stocks, while salts posted a 3 Bcf withdrawal, according to EIA.
Shah noted that Permian Basin production in West Texas is likely higher than what is being reported. Much of the output flows on intrastate pipelines for which data is not made public. The impact of Freeport LNG’s outage following an explosion earlier this month also is influencing storage dynamics, with up to 2 Bcf/d of gas now available for storage.
Several Enelyst participants also noted that Southeast markets served by Transcontinental Gas Pipe Line Co. (aka Transco) also have been tight. They questioned whether salt facilities were withdrawing gas in order to sell to Transco. “Houston Ship Channel has been weak, but Transco has been really strong, comparatively,” one market observer said.
Elsewhere around the country, Midwest stocks rose by 24 Bcf, and East inventories climbed by 23 Bcf, EIA said. Inventories in both regions continue to track more than 10% below the five-year average. The Pacific added 10 Bcf to storage, while the Mountain region added 6 Bcf.
Shah questioned whether producers would grow volumes this summer given the low storage levels in the East. However, Enelyst participants said some exploration and production companies may be “getting hosed by their hedge books” while others would likely refrain from deploying more capital now that gas prices are tumbling.
Ahead of the EIA report, market surveys had pointed to a total injection near 60 Bcf. Reuters polled 13 analysts, whose storage injection estimates ranged from 56 Bcf to 76 Bcf, resulting in a median increase of 66 Bcf. A Bloomberg survey produced a lower median projection of 59 Bcf, though the range of estimates was the same. A Wall Street Journal poll, meanwhile, had a tighter forecast range, with an average build of 66 Bcf.
The five-year average injection is 82 Bcf, while EIA recorded a 49 Bcf build for the year-earlier period.
Total working gas in storage as of June 17 stood at 2,169 Bcf, which is 305 Bcf below year-ago levels and 331 Bcf below the five-year average, according to EIA.
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