Natural Gas Storage: +80 Bcf
The storage report showed a build that came in much larger than expected.
The U.S. Energy Information Administration reported a weekly injection of 80 Billion Cubic Feet (Bcf) in Lower 48 natural gas storage inventories for the week ending October 18, 2024 (Link). Total inventories now stand at 3,785 Bcf, 106 Bcf (2.9%) above year-ago levels and 167 Bcf (4.6%) above the 2019-2023 average for the same week.
The 80 Bcf added to underground natural gas inventories during the week ended October 18 was a surprise to the market. Published expectations coming into the report called for a build near 56 Bcf, with the range of forecasts spanning from 43 to 66 Bcf. The actual number implied that the broad market was 2 Bcf per day looser than even the most aggressive market forecast. The brief cold snap experienced during the report week impacted the storage builds in the East and Midwest, which each came in tighter than the week prior. Conversely, the impact of lingering mild weather in the South Central region was apparent in the data, with stocks in that area increasing by 39 Bcf, accounting for nearly half of the overall addition. This included a 21-Bcf build into Salt storage, which is the largest since December 2022 and the 11th largest since at least 2010. Salt cavern storage was drawn down consistently during the summer months and typically refills during the fourth quarter when cash prices slump ahead of the winter. However, projecting weekly changes in this type of storage is notoriously difficult.
The build came in just 1 Bcf shy of the same week a year prior and outpaced the five-year average by 4 Bcf, slightly increasing the surplus to that benchmark. This was the first weekly build to outpace the five-year average since the week ended June 28.
On the surface, the 80-Bcf build is overtly bearish, as it showed an increase in the rate of injection despite the first significant cold snap of the season. However, the implications of this morning’s data release were complicated a bit by the fact that the overall net injection was so heavily influenced by the addition into Salt storage. Market pricing jumped late yesterday based on indications that the extreme warm temperature anomalies may subside near the end of the two-week period. Prices were firm again this morning prior to the report. While the initial data release led the market to come down off of its highs, it has yet to significantly reverse course in the hour following the government report.
At the time of writing, the November 2024 NYMEX natural gas futures contract is trading at $2.425 per MMBtu, up $0.083 per MMBtu from yesterday’s settlement.
It is now likely that inventories will post net increases for three more weeks, and with today’s strong number and the current near-term weather outlook, we are revising our end-of-summer storage peak higher. We now expect inventories to eclipse 3.9 Tcf prior to the onset of winter withdrawals based on extraordinarily mild temperatures expected into the first week of November. This does not materially change the situation heading into the winter but will give inventories a slightly stronger cushion to work with as heating demand ramps up.
Detailed Data with Updated Charts in the Natural Gas Storage Report PDF Below: