With domestic gas demand outpacing year-ago levels, the net build into US natural gas storage for the week ended May 6 is expected to come in below the five-year average, widening the storage deficit.
The US Energy Information Administration is expected to report a 74 Bcf injection for the week ended May 6, according to an S&P Global Commodity Insights survey of analysts. US storage levels would climb to 1.641 Tcf, expanding the distance to the five-year average to 314 Bcf from 305 Bcf.
The anticipated weekly build would come in higher than the 70 Bcf injection observed in the corresponding week last year but fall 8 Bcf short of the five-year average injection of 82 Bcf.
Responses to the survey were in a narrower range this week than last, with expected injections ranging from 61 Bcf to 82 Bcf. The EIA is set to release its weekly storage report on May 12 at 10:30 am ET.
S&P Global Commodity Insights’ storage model predicted a net injection of 77 Bcf for the week ended May 6, which would be, as natural gas storage analyst Eric Brooks described, “further entrenching this year’s stocks at a deficit to historically-normal levels.”
The NYMEX Henry Hub June contract gained 36 cents to reach $/MMBtu in May 10 trading, preliminary settlement data from CME Group shows. The contract continues to test out movement in both directions, with an intraday high of $/MMBtu and intraday low of $/MMBtu.
The upward momentum observed on May 10 comes after a two-trading session market correction, during which the prompt-month shed more than $1.70 from a 13-year peak of $/MMBtu reached on May 5.
Phil Flynn, senior market analyst with Price Futures Group, attributed the May 10 price recovery in part to a bullish EIA Short-Term Energy Outlook released that day, which predicted that storage levels will remain below the five-year average through the summer.
Supply and demand
Extreme temperatures have helped keep gas demand elevated during the first week of May, contributing to the below-normal predicted storage build. Texas saw unusually hot temperatures that spiked gas-fired power demand, while the Midwest and Northeast saw abnormally cold temperatures that boosted residential-commercial gas demand.
Data from S&P Global shows that US res-comm gas demand averaged 18.4 /d April 30-May 6, up 1.9 /d from the same seven days in 2021. Similarly, gas-fired power demand averaged 28 /d April 30-May 6, up 700 /d from the same time a year ago.
Industrial demand has also exceeded year-ago levels, averaging 500 /d higher than for the same week in 2021.
Looking ahead
The extreme weather — and its impact on gas demand and storage levels — looks likely to continue in the near term.
Forecasts show earlier-than-normal hot temperatures during the week in progress and into the middle of May, especially in the Southwest and Texas, which could boost gas-fired power demand and further limit builds during the crucial shoulder season.
“With cooling demand starting to pick up in some parts of the country, the window for narrowing that deficit is closing,” Brooks said.
Source: Platts
