Key Points: Robust production levels are seen from Bloomberg scrapes for the report week ending May 31. Demand from power generation is consistently rising for second week in a row and has reached the 30 Bcf/d mark. The start of the 980 MW St Charles plant in Louisiana by Entergy could have been the cause of the uptick. Dry gas imports from Canada dropped 0.03 Bcf/d or 0.24 Bcf while imports to Mexico rose by 0.08 Bcf/d or 0.55 Bcf. Henry Hub natural gas prices fell slightly to $2.54/MMBtu mark because of the uncertainty surrounding tariffs. Our analysis leads us to expect 115 Bcf storage build would be reported by EIA for the report week. Our expectation compares to the current 110 Bcf consensus whisper expectation and the five- year average that is nearly 9 Bcf lower at 106 Bcf.
Storage - Negative
EIA reported a strong injection of 114 Bcf for the week ending May 24, a good 16 Bcf higher than consensus. We expect the injection levels to be negatively impacted by the startup of power plants and LNG facilities from the month of June onwards. Our 115 Bcf storage build expectation this week is almost 18 Bcf higher than the 97 Bcf expectation from last week. The stocks has shown a consistent upward trend since start of summer with the report week ending levels at 1,867 Bcf. Accordingly, we expect storage very likely offers a negative pressure to this week’s price activity.
Weather - Neutral
The latest weather reports predict a mixed forecasts ranging from moderate to low demand through the week. Southwest regions including Texas shows highs of 80’s to 90’s in temperature. Many parts of United States are seeing showers and thunderstorms over the coming week. All in, we see weather as a neutral driver for this week’s natural gas market.
Supply – Negative
Average field supply for the report week was recorded at 85.83 Bcf/d, a 0.85 Bcf/d change week-on-week or 6 Bcf increase. Almost all of the net supply is quickly expanding storage levels, which might not be the case for the entire summer. We are keeping an eye out for any increases in demand that might cause the equilibrium to change. Supply is a strong negative factor this week.
Demand – Positive
We continue to see a positive effect from structural demand side drivers this week. Demand from power generation rose by almost 2.5 Bcf/d or 17.3 Bcf for the report week. Approximate comparisons show that current US gas demand has risen by 40% compared to demand from five years ago. We see demand as a positive factor this week.
Flows – Neutral
There were no reported upset conditions during the report week. We see flows as being a neutral driver for gas prices.
Trader Sentiment – Negative
Henry Hub natural gas prices sank slightly to $2.54/MMBtu because of the uncertainty surrounding tariffs. Futures prices for July have sunk further based on mixed weather outlook. The CFTC's 5/31/2019 commitment of traders report for NYMEX light sweet crude oil futures and options showed that reportable financial positions (Managed Money and Other) on 5/28/2019 were 487,251 net long while reportable commercial operator positions came in with a 499,410 net short position. Total open interest was reported for this week at 2,752,285 and was up 35,074 lots from last week's reported 2,717,211 level.