NYMEX Henry Hub futures market shrugs off oversized build to US natural gas storage

The weekly US natural gas storage injection more than tripled in size from mid- to late August as milder weather across the eastern half of the US lowered cooling demand, easing the market's supply crunch.

The US Energy Information Administration Aug. 25 announced a 60-Bcf injection to US inventories for the week ending Aug. 19, outpacing market expectations by 5-10 Bcf.

The addition to stocks was 9 Bcf more than the S&P Global Commodity Insights' storage survey result anticipated, which called for an injection of 51 Bcf. The weekly build was 14 Bcf larger than the prior five-year average injection of 46 Bcf, and nearly double the volume injected during the corresponding week in 2021 when just 32 Bcf was added to US stocks.

On Aug. 25, the soon-to-expire September futures contract traded in a narrow range during the morning session holding steady at around $9.30/MMBtu, apparently shrugging off the EIA's latest storage estimate.

Over the past two trading days, the balance 2022 futures contracts have held steady in the low to mid-$9/MMBtu range, consolidating losses that came after the announcement of a delayed restart to operations at Freeport LNG on the afternoon of Aug. 23. With the October gas market now long an additional 2 Bcf/d in unexpected supply, the futures market has pulled back from recent record highs.

Deficit narrows

During the seven-day period ended Aug. 19, injections in the East region recorded the largest weekly gain, more than quadrupling to a net total of 30 Bcf. In the Midwest, total injections were up 9 Bcf on the week to 30 Bcf. In the South-Central region, net storage activity flipped from a withdrawal of 8 Bcf to an injection totaling 5 Bcf, EIA data showed.

During the reference week, population-weighted temperatures across the Northeast dropped by more than 4 degrees Fahrenheit, with Texas registering a similar drop on the week. In the Midwest, a milder air mass ushered in temperatures nearly 3 F cooler. According to Platts Analytics, US gas-fired power burn demand dropped by more than 5.2 Bcf/d during the week to an average of 40.9 Bcf/d.

For the week already in progress, hotter weather in the Northeast has lifted power burn demand there by nearly 1.3 Bcf/d, while net changes in other regions appear mostly neutral on balance. According to current projections, the EIA is likely to announce a slightly smaller injection to gas storage for the week ending Aug. 26, somewhere in the range of 52-58 Bcf, Platts Analytics data shows.

This fall, the prospect of refilling US gas storage at an average or even above-average pace now looks more promising with the addition of some 60 Bcf in supply from lost feedgas demand at Freeport LNG. Over the balance of the current injection season, even average weekly builds to US stocks would leave pre-winter inventories at a concerningly low level below 3.3 Tcf. According to forecasts from Platts Analytics, the US industry is on target to finish the current injection season just above that level with a projected 3.3-3.4 Tcf in the ground.