The U.S. Energy Information Administration (EIA) on Thursday reported an injection of 57 Bcf natural gas into storage for the week ended Sept. 8. The result came in at the high end of expectations but well below historic averages, leaving the market to mull its implications.
At A Glance:
- EIA prints 33 Bcf injection
- Front month gains 6.9 cents
- U.S. production holds strong
On Wednesday, prompt-month natural gas futures fell for the first time in five sessions amid export uncertainty, cooling weather and the specter of hurricane conditions dropping temperatures further on the East Coast.
The October Nymex natural gas futures contract on Wednesday settled at $2.680/MMBtu, down 6.3 cents day/day. November lost 2.8 cents to $2.987.
NGI’s Spot Gas National Avg. fell 4.5 cents to $2.445.
The futures slump marked a reversal of a recent rally – the drivers of which remained intact but vulnerable.
On bulls’ side, production hung near 99.6 Bcf/d in Bloomberg’s estimate Wednesday, in line with a day earlier and down about 2 Bcf/d from September highs amid ongoing maintenance events in the Permian Basin.
East Daley Analytics said while natural gas output has this year dipped many times during pipeline repair work only to bounce back and hold near record levels above 100 Bcf/d, rig counts have been falling in several basins. The firm expects this to result in production declines in the key Haynesville Shale late this year, bolstering a bullish catalyst ahead of winter.
“Rig counts in Louisiana and East Texas have fallen sharply in recent months, supporting our view for a near-term decline,” East Daley analyst Oren Pilant said Wednesday.
Meanwhile, a worker strike at Chevron Corp. LNG facilities in Australia added to bullish sentiment because, if protracted, they could galvanize more calls for U.S. exports of liquefied natural gas. The labor dispute was ongoing Wednesday – and was poised to expand to more workers on Thursday — though analysts at Goldman Sachs Group Inc. said there were reasons to believe a drawn-out walkout could be averted.
“A lengthy outage is looking increasingly unlikely,” Goldman analyst Samantha Dart said. “This is both because of the potentially large revenue losses to Chevron, the facility operator, associated with a full LNG export outage, and because of potential regulatory intervention.”
Storage Estimates
What’s more, analysts broadly expected another seasonally anemic storage print with the EIA Thursday report for the week ended Sept. 8. Following a scorching summer in Texas – and withdrawals in recent weeks in the South Central region – storage surpluses relative to the five-year average have been on the decline, providing price support.
NGI modeled a 52 Bcf increase for Thursday’s print. Estimates submitted to Reuters ranged from injections of 39 Bcf to 57 Bcf, with a median of 48 Bcf. Bloomberg’s poll generated a range of injections of 40 Bcf to 58 Bcf and a median increase estimate of 51 Bcf. The Wall Street Journal’s survey produced an average injection estimate of 47 Bcf.
The estimates compare with an increase of 74 Bcf a year earlier and a five-year average addition of 76 Bcf.
EIA posted a 33 Bcf increase in natural gas storage for the week ended Sept. 1, which was below the five-year average build of 60 Bcf. It increased inventories to 3,148 Bcf and kept stocks 222 Bcf above the five-year average. But the surplus was down from around 350 Bcf earlier in the summer.
But as is often the case as autumn draws near, weather can trump all other factors. NatGasWeather had cautioned cooler conditions were bound to snap the recent rally. It noted that fall-like temperatures had settled in across the North, and Hurricane Lee, moving across the Atlantic and toward the East Coast Wednesday, was bound to deliver chilly conditions to the Northeast by the weekend.
Additionally, LNG export levels Wednesday remained below 12 Bcf/d and off from 2023 highs around 15 Bcf/d – as they have since the weekend – because of possible maintenance work at the Freeport LNG in Texas, NatGasWeather said. Feed gas deliveries to the facility have plummeted since Saturday.
Physical Market
Spot natural gas prices slid lower Wednesday alongside falling temperatures.
Declines in the Northeast for Thursday delivery led the trend, with Algonquin Citygate off 60.5 cents to $1.740 and Tenn Zone 5 200L down 71.5 cents to $1.690.
In Appalachia, Eastern Gas South fell 14.5 cents to $1.540, while Tennessee Zn 4 313 Pool shed 12.0 cents to $1.560.
NatGasWeather said most of the Lower 48 would experience comfortable conditions the rest of this week “as weak weather systems track through with showers and highs of upper 60s to 80s for light demand. Hurricane Lee will track off the East Coast this week with rain squalls and heavy surf,” ushering in more cool air.
The Southwest deserts were forecast to remain sultry, with highs in the upper 90s and low 100s. But Texas, the other epicenter of heat this summer, had begun to see temperatures moderate, with highs in the 80s and 90s this week. More of the same was expected next week.
Space City Weather meteorologist Erig Berger said Houston could see cooling rains through the current trading week. Highs in the mid-90s were likely to follow starting next week, but humidity was forecast to ease and, by the end of the month, fall weather may arrive.
“Still no sign of a strong fall cool front yet, I’m afraid,” Berger said Wednesday. “We’re still at least 10 days out from that.”Houston Ship Channel on Wednesday ticked up 2.0 cents to $2.300.
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