Leading up to todays EIA Natural Gas Storage Report, wholesale contracts continued its losing streak on Wednesday, as natural gas traders looked ahead to fresh weekly information on U.S. gas inventories to gauge the strength of demand for the fuel. Natural gas for delivery in September on the New York Mercantile Exchange lost 1.7 cents, or 0.56%, to settle at $2.660 per million British thermal units.
U.S. utilities likely injected just 26 billion cubic feet of natural gas into storage in the week ended July 22, as hotter-than-usual weather boosted demand for gas-generated electricity to run air conditioners, a poll of analysts showed on Wednesday which would be the lowest addition since 2010 for that week. The estimate compared with builds of 34 bcf in the prior week, 52 bcf for both the year ago and average over five years for the corresponding week.
If the estimates are correct, total stocks would rise to 3.303 trillion cubic feet after the warm winter of 2015-16 left stockpiles at record highs. The stocks are the highest for the week since 2010, the latest date for which data are available. That would put total stocks about 16 percent over the same week a year ago and around 19 percent over the five-year average.
But that oversupply has been narrowing as power generators have burned record amounts of relatively low-cost gas instead of coal since the start of the injection season on April 1, when stocks were 74 percent over the year ago and 54 percent over the five-year average.
The storage glut has kept a lid on next-day prices at the Henry Hub benchmark in Louisiana, which has averaged $2.14 so far this year. That compares with $2.61 in 2015, the lowest since 1999. Natural gas wholesale contracts for the balance of 2016, meanwhile, were fetching $2.85.
U.S. power generators are expected to burn an average of 39.5 billion cubic feet per day of gas this week and 39.4 bcfd next week to meet air conditioning demand, topping the record high of 37.8 bcfd set in July 2015, according to Thomson Reuters data.
Early estimates for the week ending July 29 ranged from injections of 2 bcf to 20 bcf, with an average build of 10 bcf. That compares with a year-earlier injection of 41 bcf for the same week and a five-year average addition for that week of 54 bcf.
EIA Natural Gas Storage Report 7-28-16
Working gas in storage was 3,294 Bcf as of Friday, July 22, 2016, according to EIA estimates. This represents a net increase of 17 Bcf from the previous week ( seen here ). Stocks were 436 Bcf higher than last year at this time and 524 Bcf above the five-year average of 2,770 Bcf. At 3,294 Bcf, total working gas is above the five-year historical range.
Analysts had expected that U.S. utilities injected 26 billion cubic feet of natural gas into storage in the week ended July 22. As of 10:32 ET, natural gas futures were trading higher by 5.5% to $2.806.
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