US natural gas storage levels increase by 92 Bcf, slimming deficit: EIA

US natural gas working stocks rose by 92 Bcf during the week ended June 10, reducing the deficit to the five-year average and slowing the momentum of a two-day recovery for gas futures.

Storage inventories rose to 2.095 Tcf for the week ended June 10, the US Energy Information Administration reported June 16. The build was slightly higher than an S&P Global Commodity Insights' survey of analysts calling for an 89 Bcf net injection.

The weekly injection was more than triple the 28 Bcf build reported during the corresponding week in 2021, and 13 Bcf more than the five-year average build of 79 Bcf, according to EIA data. The above-average build reduced storage's deficit to the five-year average to 323 Bcf, or 13.4% from 336 Bcf, or 14.4%, the previous week.

Futures rally interrupted

The NYMEX Henry Hub July contract's settlement came in far lower than that was observed in early morning trading, suggesting that the above-average build into storage helped stymie a fledgling futures rally.

In June 16 trading, before the weekly gas storage report was published at 10:30 am ET, the July contract was on a path toward retracing its steps back toward $8/MMBtu. The Henry Hub prompt traded around $7.87/MMBtu in the minutes before the report was released, up more than 40 cents from the June 15 settlement of $7.42/MMBtu. Within an hour of the report's launch, the contract had dropped to $7.70/MMBtu and fell further as the trading session went on.

The NYMEX Henry Hub July contract settled at $7.464/MMBtu June 16, up 4.40 cents from the prior day, preliminary settlement data from CME Group shows.

News of an extended outage at Freeport LNG June 14 triggered the largest selloff of the Henry Hub prompt contract since Jan. 28, with the contract shedding $1.42 to $7.189/MMBtu June 14. The contract recovered 23.10 cents on the following trading day.

Heat wave

Looking ahead to the week in progress, a forecast by S&P Global's supply and demand model calls for a much smaller draw of 52 Bcf for the week ending June 17, which would erase this week's gains against the deficit.

While the Freeport LNG outage is expected to loosen supply-demand balances in the South Central region, heightened cooling demand from record-high temperatures in the Midwest, Southeast, and Texas has soaked up some of the excess supply, leaving less gas available to flow into storage in the near term.

S&P Global data shows that gas-fired power demand in Texas and the Southeast has come in 1.5 Bcf/d, or 9%, higher month to date than year-ago levels. Similarly, gas demand in the Midwest and Midcontinent has come in nearly 800 MMcf/d, or 6%, higher so far this June compared with last.

The National Weather Service has forecast sizzling temperatures to continue through at least the end of the month, which should keep gas-fired power demand elevated and threaten the tenuous progress storage levels have made toward closing the deficit during the week ended June 10.