08 Aug 2024 | 16:21 UTC

US EIA gas storage estimate undershoots consensus again; NYMEX rallies

Highlights

Surplus falls for fourth consecutive week to 424 Bcf

NYMEX prompt surges 15 cents on report to $2.18

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The US Energy Information Administration Aug. 8 reported a 21 Bcf injection to US working gas storage from late July to early August in another bullish estimate that came in below market expectations.

The 21-Bcf injection reported by EIA was 6 Bcf smaller than the consensus estimate from S&P Global Commodity Insights' weekly gas storage survey, which predicted a 27-Bcf build for the week.

EIA's latest injection estimate was also bullish by historical standards. In 2023, EIA reported a 25 Bcf build to US inventory from late July to early August. Over the past five years, the agency has reported an average 38-Bcf injection to domestic storage in the corresponding week, EIA data showed.

In the hour immediately following publication of EIA's storage report, the NYMEX September gas futures contract surged about 13 cents to $2.16/MMBtu. After topping out at $2.18/MMBtu, prompt-month futures prices retreated by late afternoon to trade around $2.10-$2.15/MMBtu, from CME Group data showed.

After dipping to the upper $1.80s/MMBtu earlier this month, the September gas futures contract has rebounded from recent lows supported by a fourth consecutively bullish storage report from EIA and amid early signs that US producers may be tapping the brakes on output.

"The gas market is still seasonally oversupplied, and there is currently little fundamental basis for a rally," Eli Rubin, senior energy analyst at EBW Analytics wrote in a Aug. 8 market note to subscribers. "Still, technicals pointing higher, smaller August injections, production curtailments and a sizable speculator short position could all pose upside risks," he said.

Fundamentals

In the week to Aug. 2, hot weather across the Midcontinent, Texas, the Southeast, and the Northeast helped fuel a roughly 3.8 Bcf/d gain in US gas demand. The weekly gain was led principally by stronger US gas-fired power burn which was up about 2.5 Bcf/d compared with the week prior. Feedgas deliveries to the US LNG terminals were also up by nearly 1 Bcf/d. On the supply side, the US gas market lengthened by nearly 900 MMcf/d thanks mostly to higher pipeline imports from Canada, but also owing to a modest uptick in domestic gas production. On balance, the US gas market still tightened by roughly 2.9 Bcf/d, data from Commodity Insights showed.

As of Aug. 2, US inventory now stands at 3.270 Tcf which is 424 Bcf, or nearly 15%, above the five-year average of 2.846 Tcf and 248 Bcf, or about 8%, above the year-ago level of 3.022 Tcf.

Outlook

For the week ending Aug. 9, US supply-demand estimates are currently pointing to tighter market conditions again. During the week, US gas production is down about 800 MMcf/d from the seven-days prior to average about 102.7 Bcf/d, or its lowest since early July. Combined with lower imports from Canada, supply-side fundamentals have tightened about 1.4 Bcf/d. In the downstream market, stronger gas-fired power burn has led an overall 440 MMcf/d gain in US gas demand. On balance, the US gas market has tightened by over 1.8 Bcf/d, data from Commodity Insights showed.

Based EIA's latest storage report, and the change in weekly market fundamentals, its possible that the agency's upcoming estimate could show a single-digit injection for the week to Aug. 9.

According to Commodity Insights' market models EIA will likely post another bullish storage report for the week to Aug. 9. The daily storage report forecast is currently predicting a draw of up to 11 Bcf. The supply-demand model meanwhile is predicting an injection of just 15 Bcf. The two forecasts compare with a five-year average injection of 43 Bcf and a year-ago build of 33 Bcf, both reported in the corresponding week, data from EIA showed.


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