US cash, futures gas prices slump amid forecasts for largest-ever weekly storage build

US natural gas prices across the cash and futures markets dropped in Oct. 7 trading amid looser supply-demand dynamics that have put US gas storage on track to potentially see the largest weekly injection on record in the next Energy Information Administration report.

Spot gas prices across all US regions fell in Oct. 7 trading for Oct. 8-10 flows, even in the Midwest and parts of Appalachia where the first cold snap of the season promises to boost gas demand for heating.

Cash Henry Hub fell 67.50 cents to $6.23/MMBtu at preliminary settlement, pricing data from S&P Global Commodity Insights showed, in line with the 40-90 cent daily losses observed for most spot hubs.

In the futures market, the front-month NYMEX Henry Hub contract shed around 22.40 cents from its prior-day settlement to settle at $6.748/MMBtu on Oct. 7, according to data published by CME Group.

The downward pricing momentum comes on the heels of the EIA reporting a much larger-than-expected build into weekly storage Oct. 6. The 129 Bcf build for the week ended Sept. 30 outpaced market expectations of around 114 Bcf and exceeded the five-year average build of 82 Bcf by 57%.

An even larger build looks likely for the next weekly gas storage report, according to a new forecast from S&P Global, which would narrow the deficit to the five-year average to its lowest point since January.

Rapidly filling storage

On Oct. 7, S&P Global's supply-demand model predicted a net build of 134 Bcf for the week to Oct. 7, which would surpass the existing all-time record of 132 Bcf set in June 2015. A build of this size would mark the fourth consecutive week of triple-digit builds -- a streak that has been observed just twice during the last decade.

Robust gas production at a time of waning shoulder season demand, combined with LNG export facility maintenance and a recent hurricane that slashed Southeast gas demand, have put more supply out in the market than demand over the most recent seven days.

Actions by operators of pipelines and storage facilities have enabled the injection of the excess supply into storage, S&P Global gas storage analyst Eric Brooks said in an email.

"Many pipelines and storage facilities have recently issued waivers on their injection overrun limits, which historically have curtailed storage injection rates in the latter part of the injection season," Brooks said.

"With those injection restrictions now effectively off the table, we're seeing record-high injection rates in the eastern half of the country that have led to a much narrower inventory deficit today than what we've seen over the course of the summer injection season."