EIA report on U.S. natural gas storage expected to show largest shortfall yet for 2022

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Strong points

Survey predicts 87 billion cubic feet of construction in the week ended May 20

The storage deficit would widen further to 320 Bcf

NYMEX gas futures rally, trading near $9/MMBtu

U.S. natural gas in storage likely rose at a below-average pace in the last week of May as scorching heat across Texas and the Midcontinent limited inventory injections, further supporting the recovery in stocks. NYMEX gas futures contracts.

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The US Energy Information Administration is expected to report this week an injection of 87 billion cubic feet into US gas storage for the week ending May 20, according to this week’s analyst survey by S&P Global Commodity Insights. Survey responses were reported in a much wider range this week, with expected injections ranging from just 76 billion cubic feet to 102 billion cubic feet. The EIA plans to release its weekly storage report on May 26 at 10:30 a.m. ET.

The planned construction of 87 billion cubic feet would be the sixth undersized injection reported in 2022, which comes as unusually warm temperatures drive demand for gas cooling in Texas, the Midcontinent and Western States. United States, after unusually cool weather last month in the Midwest and Northeast. .

A build of 87 billion cubic feet would be well below the corresponding week of 2021 injection of 109 billion cubic feet and below the five-year average injection of 97 billion cubic feet. Assuming the survey’s prediction is correct, US storage levels would climb to 1.819 Tcf, widening the deficit at the five-year average to its highest level this year at 320 Bcf while widening the deficit at storage levels of the corresponding week of 2021 at 380 Bcf.


NYMEX Rally

In May 24 pre-market trading, fast-month gas futures prices on NYMEX only reached briefly tested highs earlier this month in the $8.90/MMBtu as the rally history still shows no signs of slowing down.

“Production is struggling, exports are high – the only thing that could save us is the weather,” Phil Flynn, senior account manager at The Price Futures Group, said on May 24. we are in a very difficult situation. I think the market not only reflects where we are now, but where we are going.

Over the past week, unseasonably warm weather has supported gas prices at $8 as the market grows increasingly wary that strong cooling demand this summer will keep gas supply up. cash in the United States.


Weather

Last week, the potential market impact of extreme heat was highlighted in Texas, Oklahoma and the Central Plains, where high temperatures soared into the 90s with some places over 100 degrees. Fahrenheit, which is about 20 to 30 degrees above normal.

In Texas, gas-fired electricity consumption reached record levels in mid-May at nearly 5.6 billion cubic feet per day. At Katy Hub, spot prices jumped alongside Henry Hub to trade above $8.40/MMBtu, while prices at NGPL Midcontinent in Oklahoma hit their highest level this year at 8 $/MMBtu.

This summer, a minimum risk of 33% to 40% of above-average temperatures is expected in every US state during June, July and August, according to a seasonal forecast released May 19 by the US National Weather Service. The hottest weather is expected to hit the western third of the United States, including Texas, most of the northeast Atlantic coast and all of New England.

Outlook

The near-term storage outlook for the week ending May 27 already calls for another below-average injection into inventory in the range of 60 to 70 billion cubic feet, which could widen the deficit to as much as 40 billion cubic feet. Looking further ahead, many analysts are now forecasting US end-of-season stocks to end below 3.5 Tcf in early November, which could create a bullish supply and price scenario as we approach winter 2022-23.

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