US natural gas storage to continue rising below five-year average pace

The US natural gas storage deficit likely widened through mid-April as unseasonably cool weather fueled late-season heating demand, supporting a now aging rally in the NYMEX gas futures market.

The US Energy Information Administration this week is expected to report a 31 Bcf injection to US gas storage for the week ended April 15, according to this week's survey of storage analysts by S&P Global Commodity Insights. Responses to the survey came in a slightly tighter range this week, spanning from 15 Bcf to a 51 Bcf injection. The EIA plans to release its weekly storage report on April 21 at 10:30 am ET.

The expected injection of 31 Bcf would be the third reported injection of 2022, but only the second consecutive weekly build this season, which comes as cool spring temperatures limit injection demand.

The anticipated 31 Bcf injection would fall short of the 2021 corresponding-week and five-year average injection of 42 Bcf. Assuming the survey prediction is accurate, US storage levels would climb to 1.428 Tcf, but expand their deficit to the five-year average to 314 Bcf and widen the shortfall to 2021 corresponding-week storage levels to a brow-raising 450 Bcf.

Heating demand

Unusually cool US weather from late March through mid-April have been a key driver behind a continued rally in the NYMEX natural gas futures market, which has kept prompt-month prices near $7.

Over the past three weeks, population-weighted temperatures across the US Midwest have averaged a brisk 43.2 degrees Fahrenheit, or about 3 degrees below normal for the period. In the Northeast, weighted temperatures over the past 21 days have trended about 1.3 degrees below normal at an average 50.2 F, S&P Global Commodity Insights data shows.

Stronger heating demand from those two key regions has lifted total US residential-commercial gas demand to an average 27.3 Bcf/d since March 25, outpacing the five-year average by about 1.8 Bcf/d.

With stronger heating demand increasing the call on gas storage this spring, the current injection season is off to a rocky start helping to keep gas futures prices near historic highs amid growing concern over this summer's potentially steep inventory requirements.

"I do think we got ahead of ourselves with the weather," Phil Flynn, senior account executive at the Price Futures Group, said by telephone April 18.

"I do think [the NYMEX gas futures market] is coming back down – but, if we flip from below-average to above average-temperatures [this summer], I do think the rally is sustainable," he said.

Outlook

For the week currently in progress, S&P Global's natural gas supply-demand model is projecting a 38 Bcf injection, which would undershoot the five-year average and further widen the inventory deficit. If the prediction is accurate, US gas storage would likely remain well below 1.5 Tcf through late April.

According to S&P Global's latest storage forecast, inventories are still expected to reach close to normal pre-winter levels this year around 3.5 Tcf by late October. With LNG export demand expected to continue growing through the summer, storage traders and utilities competing for available supply could be forced to pay premium prices this season