Driven by a double digit withdrawal of 11 Bcf in the South Central region, this week’s injection of 46 Bcf was thin yet again. Market expectations ranged from 52 Bcf to 61 Bcf, so this bullish build has managed to increase the storage inventories deficit to over 600 Bcf against the five-year average yet again. Even with the anticipated impact of Hurricane Florence lowering the demand for gas-fired electricity generators, this report reflected an influential week in fundamental market factors as high volatility in temperatures, paired with fluctuations between heating and cooling across residential and commercial users, makes for a more difficult demand forecast. The market has already been reacting to recent reports of cooler weather patterns across the northern U.S. that are expected in early October, and the low storage numbers are seemingly another catalyst in the NYMEX November contract month’s climb to over $3/MMBtu. The next two months are instrumental for determining an expectation for the upcoming withdrawal season, and, unless injections manage to increase a significant amount each week, the potential for going into winter with the lowest storage inventories in several years could result in higher natural gas prices.
Working natural gas in storage currently stands at 2,768 Bcf, which is 690 Bcf (20.0%) lower than this time last year and 621 Bcf (18.3%) lower than the five-year average.
The November 2018 NYMEX Futures price began the day around $2.99/MMBtu prior to the report’s release, but has since risen to $3.05/MMBtu after the report was posted.
Outlook for the Balance of Storage Season:
The graph below compares historical 12, 24 and 36 month strip prices and storage levels for the past 5 years.
The following table shows the injection numbers we will need to average by week to hit selected historical levels:
The following two graphs show current natural gas in storage compared to each of the last 5 years and weekly storage averages and patterns.
The graph below shows the injections through the current week over the past 5 years.
Finally, the graphics below depicts the 6 to 10 day temperature range outlook from the National Weather Service.
Current Week’s Outlook