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James Hyerczyk
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Natural Gas

Natural gas futures are inching lower on Thursday shortly before the release of the government’s weekly storage report at 14:30 GMT. Despite calls for a large number, the market remains well supported by lower production and robust demand for U.S. liquefied natural gas (LNG).

At 10:10 GMT, July natural gas futures are trading $3.014, down $0.004 or -0.13%.

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Lower Production, Higher LNG Demand

According to Natural Gas Intelligence (NGI), production estimates at the start of trading on Wednesday hovered around 89 Bcf, roughly 1 Bcf below recent averages and well below pre-pandemic levels.

At the same time, LNG feed gas volumes hung near 11 Bcf, far above year-earlier levels. European gas storage was depleted over a freezing winter and chilly spring, driving demand and higher prices for U.S. LNG. Elevated needs in Europe are boosting prices – and near-term demand – in Asia as well, as traders pay up to attract shipments, according to analysts.

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Short-Term Weather Outlook

NatGasWeather on Wednesday said the American and European weather models both “held a bearish U.S. pattern” for Friday through May 25 that would see “only localized heat” over southern parts of the country. The upcoming pattern is especially bearish starting this weekend through next week, when comfortable temperatures are to permeate the Midwest and East, according to the firm.

“The southern U.S. becomes warm to very warm with highs of 80s to 90s,” NatGasWeather said, but it may not be enough to minimize storage injections in May. “The coverage and intensity of highs reaching the 90s over the southern U.S. still isn’t expected to be as widespread as needed to intimidate through May 26 and should result in several large weekly builds near or over 90 Bcf.”

Energy Information Administration Weekly Storage Report

Looking ahead at today’s EIA weekly storage report for the week ended May 7, estimates submitted by Bloomberg showed a median 73 Bcf injection. Predictions ranged from an injection of 68 Bcf up to 92 Bcf. A Reuters poll of 16 analysts showed a range of estimates from an injection of 68 Bcf to 82 Bcf, with a median build of 77 Bcf.

The average forecast of 13 analysts participating in a Wall Street Journal survey landed at 73 Bcf. Estimates ranged from increases of 68 Bcf to 79 Bcf.

Energy Aspects issued a preliminary estimate earlier in the week for an 85 Bcf injection and NGI’s model forecast an 82 Bcf injection.

Last year, the EIA recorded a 104 Bcf injection for the similar week. The five-year average build is 82 Bcf.

Daily Forecast

Today could mark the start of three consecutive relatively large storage builds, but traders don’t seem to be too concerned about this with July futures prices still hovering just below a multi-month high reached last week at $3.045. This is because the reliable LNG strength has in recent days helped offset forecasts for light weather-driven demand, according to Natural Gas Intelligence.

For a look at all of today’s economic events, check out our economic calendar.
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