US working natural gas in underground storage increases by 89 Bcf: EIA

US natural gas working stocks increased by 89 Bcf in the week ended May 13, narrowing the deficit to the five-year average slightly, but not by enough to calm supply concerns in the futures market.

Storage inventories rose to 1.732 Tcf for the week ended May 13, the US Energy Information Administration reported May 19. The build was 2 Bcf more than an S&P Global Commodity Insights' survey of analysts calling for an 87 Bcf injection, but in line with S&P Global's supply-demand model's prediction of 89 Bcf.

The injection was more than the 71 Bcf build reported during the corresponding week in 2021 as well as the five-year average build of 87 Bcf, according to the EIA data. As a result, stocks were 358 Bcf, or 17.1%, less than the year-ago level of 2.09 Tcf and 310 Bcf, or 15.2%, less than the five-year average of 2.042 Tcf. Week-over-week, the most recent storage report showed the deficit to the five-year average narrowing by 4 Bcf.

The NYMEX Henry Hub June contract hovered near $8.19/MMBtu in the first five minutes of trading following the weekly storage report, down around 18 cents from May 18's settlement of $3.368/MMBtu, but subsequently climbed to trade at $8.35/MMBtu by 1pm ET.

Robust power demand

Market watchers have cautioned that although recent weekly storage builds have been in line with seasonal norms, refilling storage will require larger-than-average builds to compensate for starting this injection season at a sizeable deficit.

Strong gas demand and comparatively lackluster production gains have stymied the market from realizing substantially above-average net injections.

The main driver of gas demand growth so far this May has been gas-fired power demand. Unseasonably hot temperatures and limited fuel switching optionality have pushed US gas-fired power burn far above year-ago levels. Power burn has averaged 29.5 Bcf/d so far this May, up 3.4 Bcf/d, or 13%, from the same time last year, data from S&P Global showed. LNG feedgas demand also continues to outpace year-ago levels, with S&P Global data showing month-to-date demand averaging 12.4 Bcf/d, up from 10.6 Bcf/d last May.

On the supply side, US gas production has averaged 93.6 Bcf/d so far this month, up 1.1 Bcf from last May, data from S&P Global showed. For the week ended May 13, production averaged 94 Bcf/d, up nearly 800 MMcf/d from the prior seven days (April 30 – March 6).

Outlook

A forecast by S&P Global's supply and demand model calls for a smaller build of 82 Bcf for the week ending May 20, which would widen the deficit to the five-year average to 325 Bcf. The corresponding week in 2021 saw a 102 Bcf build.

Expectations for a smaller build into storage for the week ending May 20 are supported by lower supply and higher demand observed for the week in progress. Gas production averaged just 93.6 Bcf/d for May 14-19, down 400 MMcf/d from the previous seven days. Inflows from Canada have also fallen week-over-week, as pipeline constraints limit West Canada-to-Pacific Northwest flows.

Gas-fired power burn averaged 31.8 Bcf/d so far in the week in progress (May 14-19), up from averaging 29 Bcf/d for May 7-13. A heat wave in Texas and the Midcontinent has brought highs into record-setting ranges, spiking cooling demand.