US natural gas in storage forecasts to increase by 101 Bcf: survey

US natural gas in storage forecasts to increase by 101 Bcf: survey

Despite lower associated natural gas production from nearly all major US oil basins due to plummeting rig counts, as well as states easing up on coronavirus restrictions, US working gas stocks in storage likely increased by triple digits last week, according to a survey of analysts.

The US Energy Information Administration is expected to report a 101 Bcf injection for the week ended May 22, according to a survey of analysts by S&P Global Platts. Responses to the survey ranged from an injection of 88 Bcf to 114 Bcf. The EIA plans to release its weekly storage report on Thursday at 10:30 am ET.

As rigs continue to decline in the wake of low crude oil prices, US production estimates tumbled 2.7 Bcf/d for the week-ended May 22, marking the largest week over week decline in more than two years, according to S&P Global Platts Analytics.

For example, the Permian lost 10 rigs last week bringing to basin’s total rig count to just 185, the lowest level since July 2016. The declines come as total Permian production also slides, averaging just 10.3 Bcf/d the last week, 1.1 Bcf/d below the April average. While production is forecast to bottom out in June and then return by August as shut-in wells come back online, the severely depressed rig count will have a lasting impact on Permian production through 2022.

The blow to supplies was offset by the rapid arrival of balmy weather that kicked up power burn by 2.8 Bcf/d week over week. The warmer temperatures also dropped residential and commercial demand to year-to-date lows, freeing up an additional 50 Bcf for storage, and pushing forecasts for this Thursday’s storage report back above 100 Bcf.

The trade-offs between falling production and rising power burn demand will play a large part in how Lower 48 inventories finish injection season, with Platts Analytics currently expecting US stock levels to exceed 4 Tcf by the end of October.

A 101 Bcf injection would be less than the 110 Bcf addition in the corresponding week last year but more than the five-year average build of 93 Bcf. An addition within expectations would increase stocks to 2.604 Tcf. The surplus to the five-year average would increase to 415 Bcf, and the overhang to 2019 would decrease to 770 Bcf.

The NYMEX Henry Hub June contract added 4.7 cents to $1.778/MMBtu during afternoon trading on Tuesday. The summer strip continues to lag behind the winter strip by about 80 cents, incentivizing strong injection activity.

Platts Analytics’ supply and demand model currently expects a 118 Bcf injection for the week ending May 29, which is 15 Bcf more than the five-year average.

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