EIA Sees U.S. Natural Gas Inventories 6% Above Five-Year Average After Injection Season

In the April STEO, EIA estimate natural gas inventories will end the injection season (April–October) at 3.8 trillion cubic feet, 6% above the five-year average. This follows the mild winter weather in the first quarter of 2023 (1Q23). Natural gas inventories ending the withdrawal season (November–March) 19% higher than the five-year (2018–2022) average. This was also helped by Freeport being shut down as and such LNG exports curtailed as a result. The Freeport terminal accounted for around 20% of all U.S. natural gas exports before the explosion on June 8.  LNG feed gas demand fell to a four-month low under 10.4 Bcf/d in the estimates after to the blast.

US natural gas benchmark Henry Hub futures have remained under pressure as mild April forecasts & the healthy storage buffer as we shift from winter heating season keeps pressure on prices.

Henry Hub Price Estimates

The EIA forecast that the Henry Hub natural gas spot price will average about $2.65 per million British thermal units (MMBtu) in 2Q23 as natural gas inventories begin to rise. With inventories remaining above the five-year average in 2023, we expect natural gas prices to average less than $3.00/MMBtu for 2023, a more than 50% decrease from last year.

Energy Price Closes April 6, 2023

STEO Natural Gas Storage Highlights

  • At the end of March, typically considered the end of the U.S. storage withdrawal season (November–March), EIA estimate working natural gas in U.S. storage reached 1,856 billion cubic feet (Bcf), 19% more than the five-year (2018–2022) average.
  • Lower-than-average withdrawals of natural gas from storage in the first quarter of 2023 (1Q23) resulted in natural gas inventories rising above the five-year average and contributed to falling natural gas prices.
  • The natural gas spot price at Henry Hub averaged $5.45 per million British thermal units (MMBtu) in November 2022 and declined to average $2.31/MMBtu in March. (See current prices in above table, HH is shown as Natural GAs Price)
  • EIA expect U.S. natural gas inventories to increase by 1,985 Bcf during this year’s injection season (April–October), similar to the five-year average for summer injections, which would result in 8% higher inventories than last year’s end-of-October stocks.
  • Natural gas inventories in EIA’s forecast total 3,842 Bcf at the end of October, 6% above the five-year average.

Factors Affecting Natural Gas Inventories at the end of October

  • Temperatures throughout the summer. A warmer summer than we forecast would result in more demand for cooling, leading to more natural gas consumption in the electric power sector and less natural gas in storage, putting upward pressure on natural gas prices.
  • A cooler summer than we forecast would reduce consumption, increase storage, and put downward pressure on prices.
  • Exports, similar situations like Freeport last year that would effect export demand
  • Oil prices can affect drilling in a low price environment with liquids.
  • Recessions will affect demand, and vice versa a pick up in industrial demand would have a reverse affect

Source: EIA

From The TradersCommunity Desk