With Gulf of Mexico production ramping back up after tropical storm Barry, the market has surprisingly had little to report. This week’s 62 Bcf injection came in slightly bullish against market expectations that averaged about 66 Bcf and managed to surpass last year’s build of 46 Bcf and fell right in line with the five-average of 63 Bcf. The reporting week may not be giving NYMEX much with which to work, but the next injection will be one to watch as it will reflect the impact of actual summer heat paired with notably higher storage inventories than 2018. This is key because the U.S. Energy Information Administration “forecasts Henry Hub natural gas spot prices for June, July, and August this year will average $2.37 per million British thermal units (MMBtu). If realized, this price would be the lowest summer average Henry Hub natural gas price since 1998.” Intense heat in the Midwest and East has already mostly been realized by the market, and NYMEX continues to stay rangebound. Power index prices may experience volatility over the course of the short heat wave, but summer prices averages at most major power hubs will see little change overall. Production may be flattening and demand will see a spike in the Northeast and Midwest for a few days, but once the heat passes during the last week of July, it looks to be business as usual in the $2.28/MMBtu to $2.28/MMBtu to $2.35/MMBtu range on the prompt month.
Working natural gas in storage currently stands at 2,533 Bcf, which is 291 Bcf (13.0%) higher than this time last year and 143 Bcf (-5.3%) lower than the five-year average.
The August 2019 NYMEX Futures price began the day around $2.32/MMBtu prior to the report’s release and dropped to $2.30/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