The U.S. Energy Information Administration weekly natural gas storage report issued on May 30 continued to show heavy injections and another 114 billion cubic feet (bcf) build, bringing total inventories to 1,867 bcf. Total inventories were nearly 9 percent above last year’s level, although we still trailed the five-year average by about 12 percent. The biggest builds were seen in Midwest and East.
We are trailing the historic five-year average by 257 bcf—or approximately what we would expect in two additional weeks of storage injection for this time of the year. With a further six months of likely storage build still in front of the market, the report was perceived as mostly bearish.
The July natural gas futures contract fell to $2.45 on May as traders liquidated positions given lack of bullish fundamentals, breaking through psychological support around $2.50, and the market appears ready to plumb lower levels.
We would likely need to see some extreme weather in the form of extended heatwaves across much of the U.S. or hurricane activity in the Gulf of Mexico to curb the rate of inventory growth. These types of extreme weather, as we have seen in the present Southeast heatwave, could impact power usage (electricity/natural gas) in Gulf/SE. Continued above-average temps will bear watching over the next three months and would be about the only factor that could help support the market from further declines.
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