Another week, another decent report, but injection figures came in higher than market's expectations, and prices are moving slightly lower.
EIA reported injection figures of +69 Bcf bringing total storage to 3.041 Tcf. This compares to the +96 Bcf build last year and the +87 Bcf for the five-year average.
Market participants expected +65 Bcf versus the +69 Bcf. Part of the reason for the miss was related to higher Canadian gas imports as the AECO basis widened to $1.1/Mcf. As we've said before in our write-ups, the AECO basis differential will remain wide until the gas storage situation in Western Canada is relieved. Canadian gas imports in the meantime will remain elevated.
Injection figures for the next several weeks will start breaking five-year minimums. The market is forward looking, so natural gas prices have somewhat responded by going up to $2.58/MMBtu.
Here's an idea of what the last five-year min injections are:
Other than July 8 storage figures, the next three weeks should see the five-year mins getting shattered. This also has altered some of the projections we've seen for the end of injection storage figures. The current range of forecasts is between 3.85 Tcf - 4.25 Tcf.
Obviously, there are a lot of variables that can change for both sides. If the weather continues to cooperate, then injection figures will continue to be bullish. If the weather doesn't cooperate, then natural gas prices revert back to sub $2 to invoke a production response. Currently, US gas production continues to level off, but the pace has slowed. Price is obviously a determining factor, and if prices decrease again, then production will respond.
Overall, this was somewhat of a bullish storage report. Although it came in above expectations, relative to last year and the five-year average, it's what the market needed.
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