EIA delivers consecutively bullish US gas storage report, lifting NYMEX futures

The US Energy Information Administration delivered yet another bullish US natural gas storage report Sept. 12, reporting a 40 Bcf injection to domestic inventory during the first week of September.

The latest weekly injection reported by EIA was 10 Bcf, or 20%, smaller than the consensus estimate from S&P Global Commodity Insights’ weekly gas storage survey, which predicted a 50 Bcf build for the week.

By historical standards, EIA’s latest injection estimate was also bullish. In 2023, EIA reported a 50 Bcf injection to US inventory in the first week of September. Over the past five years, the agency has reported an average injection of 67 Bcf to US gas storage in the corresponding week, EIA data showed.

In the hour immediately following publication of EIA’s latest storage report, the NYMEX October gas futures contract surged about 10 cents to trade around $2.35/MMBtu, data from CME group showed.

Since the start of this month, the October gas contract has traded relatively rangebound at about $2.15-$2.25/MMBtu in what is a historically weak range for the October contract. Following the Sept. 11 landfall of Hurricane Francine concerns over storm-related demand destruction have abated somewhat, supporting a more bullish outlook as traders eye a retreat for the US gas storage surplus through mid-September.

“If a second straight bullish surprise is reported, it could align with supportive technicals to bolster the front of the NYMEX curve,” Eli Rubin, senior energy analyst at EBW Analytics wrote in a Sept. 12 market note released to subscribers prior to EIA's inventory report. Still, Rubin warned about the potential downside risk of weaker, weather-driven gas demand into early October and the potential for new, incremental supply from the startup of Matterhorn Express Pipeline.

Fundamentals

In the week to Sep. 6, US gas demand retreated by over 5.2 Bcf/d led almost entirely by weaker power burn. Smaller changes in residential-commercial, industrial and LNG feedgas demand largely offset one another. On the supply side, gas production continued to pull back from summertime highs, dropping about 775 MMcf/d to average just under 102 Bcf/d. Along with a drop in pipeline imports from Canada, domestic supply retreated by nearly 1.3 Bcf/d during the week. On balance, the US gas market still lengthened about 4 Bcf/d, according to data from Commodity Insights.

As previously reported by Commodity Insights, the incremental 28 Bcf gain in US gas supply in the week to Sept. 6 would have implied an injection of about 41 Bcf, based on EIA’s prior-week build of 13 Bcf in late August.

As of Sept. 6, US inventory now stands at 3.387 Tcf which is 296 Bcf, or nearly 10%, above the five-year average of 3.091 Tcf and 198 Bcf, or about 6%, above the year-ago level of 3.189 Tcf.

Outlook

For the week ending Sept. 13, US supply-demand estimates are currently pointing to a continued loosening in US gas market fundamentals. So far, declines in US gas demand have outpaced continued cuts to domestic gas production and weaker pipeline imports from Canada. According to Commodity Insights data, the gas market has thus far lengthened about 1.2 Bcf/d.

According to Commodity Insights’ market models, EIA will likely post another bullish storage report for the week to Sept. 13. The daily storage report forecast is currently predicting an injection of 54 Bcf. The supply-demand model meanwhile is predicting an injection of 63 Bcf. The two forecasts compare with a five-year average injection of 80 Bcf and a year-ago build of 62 Bcf, both reported in the corresponding week, data from EIA showed.