Natural gas futures skidded lower in early trading Friday as traders and analysts continued to contemplate evidence of looser balances in the latest round of government inventory data. The September Nymex contract was off 13.4 cents to $7.988/MMBtu at around 8:45 a.m. ET.
The Energy Information Administration (EIA) on Thursday reported a 41 Bcf injection into U.S. natural gas storage for the week ended July 29, an above-average build that also overshot pre-report estimates.
Total Lower 48 working gas in underground storage stood at 2,457 Bcf for the week, a 337 Bcf (minus 12.1%) deficit to the five-year average, according to EIA.
“Compared to degree days and normal seasonality, the reported 41 Bcf injection appears loose/bearish by approximately 1.9 Bcf/d versus the prior five-year average,” Wood Mackenzie analyst Eric Fell said of the EIA print. The period saw an above-average injection rate “despite degree days that were also above average for the week.”
Looking at power sector dynamics, nuclear and renewable generation were unchanged week/week, according to Fell.
“However, a noticeable increase in coal generation drove gas burns lower versus the prior week,” the analyst said.
Analysts at Tudor, Pickering, Holt & Co. (TPH) estimated the market was around 1 Bcf/d oversupplied based on the latest EIA data, versus a 3 Bcf/d undersupply for the week-earlier period.
The firm pointed to LNG and domestic production as the key fundamental factors influencing recent price action. In addition to the prospect of an earlier-than-expected October return to full service for the Freeport terminal, liquefied natural gas feed gas demand levels have rebounded to around 11 Bcf/d after recently dropping to a 10-month low, according to TPH estimates.
On the supply side, production levels have climbed above 98 Bcf/d this week, “outpacing our August expectations on the back of Haynesville strength,” the TPH analysts said. They noted that there are indications Permian Basin associated output has “surged higher in the past couple of weeks.”
Meanwhile, the weather data trended slightly cooler overnight, with the European model showing more cooling over the East toward mid-August versus the American dataset, according to NatGasWeather.
“The coming 15-day pattern is viewed as plenty hot enough to be considered bullish, it’s just more so in the hotter” American model, NatGasWeather said. Still, “the pattern will gradually be getting less intimidating as the second half of August progresses.”
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August 05, 2022 at 08:05PM
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