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US natural gas in underground storage rises 84 Bcf, nears five-year average: EIA

US working natural gas volumes in underground storage rose 84 Bcf last week, much more than the market expected, as NYMEX Henry Hub futures fell slightly following the announcement.

US storage stocks increased to 2.941 Tcf for the week ended August 30, the US Energy Information Administration reported Thursday morning.

The injection was much more than an S&P Global Platts’ survey of analysts calling for a 75 Bcf injection. It was also outside the survey range, as responses spanned from 69 to 83 Bcf. Overestimating demand in the EIA’s East, Midwest, and South Central storage regions accounted for the miss, according to S&P Global Platts Analytics.

The build was also more than the 64 Bcf injection reported during the corresponding week in 2018 as well as the five-year average of 66 Bcf, according to EIA data. As a result, stocks were 383 Bcf, or 15%, above the year-ago level of 2.558 Tcf and 82 Bcf, or 2.7%, below the five-year average of 3.023 Tcf.

The October NYMEX contract was trading down a half cent to $2.44/MMBtu following the larger-than-expected storage injection. The prompt-month contract made impressive gains over the past week, rising more than 15 cents but strong supply continues to drive bulky builds.

The largest injection occurred in the Midwest region, where facilities rose 37 Bcf to 827 Bcf. It is the only region with more gas in storage than the five-year average, albeit slightly at 1.3%. NGPL Chicago spot prices are 25 cents below Henry Hub.

The expectation that Chicago prices could be 80 cents/MMBtu lower this winter than last, as indicated in the futures market, is one reason Platts Analytics is forecasting Midwest power demand to be 100 MMcf/d higher year on year, despite temperatures that were 2.5 degrees lower than the 10-year average last winter.

Coal retirements and new gas builds also are adding to winter-on-winter gains. Platts North American Power Plant databank shows that 620 MW of coal generation has come offline since last winter, and 393 MW of new gas builds have come online. If gas replaced 60% of this coal generation, it would drive power demand higher by about 70 MMcf/d, assuming a heat rate of 7.5 MMBtu/MW. The new gas generation is likely to add only 50 MMcf/d of demand or so, assuming plants run at 75% capacity.

US balances have remained mostly flat week on week for the week in progress, according to Platts Analytics. Both supply and demand made similar gains. Total supplies are up 0.4 Bcf/d to average 94.7 Bcf/d, led mostly by a rise in net Canadian imports.

Downstream, total demand is up 0.5 Bcf/d to average 83.8 Bcf/d, on offsetting changes in the various fundamentals. Power burn demand has risen by 1.4 Bcf/d week on week, while residential and commercial and LNG feedgas demand fell by a combined 0.7 Bcf/d.

Gas in storage is forecast to rise by 71 Bcf for the week ending September 6, 2 Bcf below the five-year average. The end-of-season volume is now expected to hit 3.517 Tcf.
Source: Platts

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