EIA US gas storage report likely bullish again, though closer to average

Milder temperatures last week likely allowed more US natural gas supply to flow into storage, briefly pausing the rally in Henry Hub futures prices ahead of an anticipated ramp in summer gas demand.

The US Energy Information Administration this week is expected to report a 96 Bcf injection to US gas storage for the week ended June 3, according to this week's survey of analysts by S&P Global Commodity Insights. Responses to the survey were reported in a wider range this week with expected injections ranging from just 83 Bcf to as much as 117 Bcf. The EIA plans to release its weekly storage report on June 9 at 10:30 am ET.

The predicted inventory build of 96 Bcf would register just 2 Bcf less than the 2021 corresponding-week injection of 98 Bcf and modestly undershoot the five-year average injection of 100 Bcf. Assuming the survey prediction is accurate, US storage levels would climb to 1.998 Tcf, expanding the deficit to the five-year average to its widest yet in 2022 at 341 Bcf, while growing the shortfall to 2021 corresponding-week storage levels to 399 Bcf.

NYMEX rally

Record-breaking heat forecast across the desert Southwest and western Texas for this coming weekend has reignited the NYMEX bulls this week, lifting the 2022 futures curve back above $9/MMBtu.

At mid-session June 7, the NYMEX July contract was trading around $9.35/MMBtu – up just 2-3 cents from the prior-day settlement, data from CME Group showed.

In late May, futures prices pulled back to the low-$8 range as milder weather and an uptick in production helped to ease US supply tightness, leaving more gas for injection to storage.

From late May to early June, domestic production briefly topped 95 Bcf/d, to average its strongest week yet in 2022 at 94.5 Bcf/d for the seven days ended June 3, Platts Analytics data shows.

"It's a very tight market right now, we don't have any cushion for weather this year," Phil Flynn, senior account executive at The Price Futures Group, said by telephone June 7. "We got a little break on the weather last week, but we're starting to see record-breaking temperatures in Texas now," he said.

Flynn also pointed to strong US LNG exports and what he called "disappointing" production numbers.

In June, feedgas demand from US LNG export terminals has averaged nearly 12.8 Bcf/d – an increase of 2.8 Bcf/d from its year-ago level. Following a strong finish to May, US gas production has also pulled back this month to average just under 94.4 Bcf/d in June – well below its December highs in the upper 95 Bcf/d range, Platts Analytics data shows.

Weather, demand outlook

From June 9-12, high temperatures in Las Vegas and Phoenix are forecast to top 110 degrees Fahrenheit, with both cities under an excessive heat watch advisory issued by the National Weather Service for part, or all, of that period.

A revised power burn forecast for the US West now shows gas demand from generators in the region topping 4.5 Bcf/d this coming weekend, reaching its highest since February.

For the week ending June 10, stronger power burns in the Southwest are expected to keep the domestic market in tight supply with Platts Analytics' supply-demand model already projecting a net injection of 84 Bcf for the week – just 5 Bcf more than the five-year average, EIA data shows.