US working natural gas net build drops on reclassification to base gas: EIA

Due to a massive reclassification of working natural gas to base gas in the Pacific storage region, the US Energy Information Administration reported a paltry 16 Bcf net injection to inventories for the week ended June 11 as below-average builds ahead look to drive up the deficit further.

Storage inventories increased by an implied flow of 67 Bcf for the week ended June 11, according to EIA data released June 17. However, due to the 51 Bcf reclassification in Pacific Gas & Electric’s storage system in California, the net change resulted in a 16 Bcf injection for the week. This proved well below the five-year average of 87 Bcf.

Storage volumes now stand 453 Bcf, or 16%, less than the year-ago level of 2.88 Tcf and 126 Bcf, or 5%, less than the five-year average of 2.553 Tcf.

The NYMEX Henry Hub July contract dipped 2 cents to $3.23/MMBtu in trading following the release of the weekly storage report. Prices through balance of summer were trading roughly 3 cents lower on the day, bringing the July-October Henry Hub contract strip down to an average $3.24/MMBtu.

This extends the volatility that has marked the gas markets over the last week. Prices rose from $3.16/MMBtu to $3.30/MMBtu June 11 following news from Texas Eastern Pipelines that its 30-inch system would be operating at a reduced pressure through the end of Q3, limiting supplies from reaching the Gulf Coast region.

The upward pressure continued to mount in the days that followed, culminating in a settlement of $3.36/MMBtu on June 14 before falling sharply in the following days. Overall, prices are up roughly 5 cents from where they were a week ago, but they are down nearly 15 cents from where they were only a few days ago.

Platts Analytics’ supply and demand model currently forecasts a 58 Bcf injection for the week ending June 18, which would measure 25 Bcf less than the five-year average and 57 Bcf below last year.

The week in progress has essentially been a scaled-down version of the reference week, featuring gains in power demand matched with losses from the residential and commercial and industrial sectors. Total demand is up 500 MMcf/d week over week, aided by a partial return of some LNG feedgas that fell off the week before.

In the eastern half of the US, temperatures cooled for the week ending June 18, freeing up more than 5 Bcf of additional gas for storage. Out west, however, the punishing heat wave has pulled almost 10 Bcf more week over week, mostly from the southwest, pushing up basis all throughout the balance of summer contracts.

Upstream, supplies dipped 700 MMcf/d week over week, undoing all of the previous week’s production gains as onshore receipts were seen averaging 1 Bcf/d lower on the week. Overall, total US supply and demand balances tightened by 1.2 Bcf/d this week.
Source: Platts