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South Central gas storage is approaching the 5 year average, cooling the NYMEX winter rally

Highlights

Inventory rises to 1.172 Tcf, 16 billion cubic feet below average

Perm, Haynesville Production at record highs

NWS sees mild winter temperatures in Texas, southeast

A series of oversized late-season injections into the U.S. South Central gas storage facility recently closed the void in the region’s persistent inventory deficit and allied benchmark Henry Hub concerns about winter supply in the Gulf Coast premium market.

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In the past eight weeks, injections into gas storage facilities in the states of South Central totaled $ 229 billion.

For the week ended October 29, inventories in the region are now estimated at 1,172 Tcf – just 16 billion cubic feet below the five-year average, according to data released November 4 by the US Energy Information Administration.

The hectic pace of injections over the past two months has reduced the region’s inventory deficit from an alarming 103 billion cubic feet in early September. As inventory levels increased, the rally in winter gas prices in Henry Hub has weakened, pulling back from all-time highs of around $ 6.50 / MMBtu in early October.

On November 5, NYMEX Henry Hub futures prices for December, January and February fell about 14 cents to $ 5.58, $ 5.69 and $ 5.56 / MMBtu, respectively, data from CME Group showed.

Winter supply

Rising inventories in South Central have accompanied recent increases in gas production in Texas and the Southeast, which has helped to further alleviate market concerns about winter season supply.

Gas production in the Permian Basin skyrocketed in November and climbed to an average of 13.9 billion.

Also in Haynesville, producers recently increased production, bringing the pool’s total revenue to over $ 14 billion that month.

At the US level, gas production averages nearly $ 93.5 billion this month.

requirement

Seasonal weather forecasts, released by the U.S. National Weather Service and other seasonal forecasters, have also recently helped offset the rally in the natural gas futures and futures markets

In its latest seasonal outlook, the weather service forecast a 40-50% probability of above-average temperatures in Texas and the southeast from December to February. If the milder temperatures are achieved, they could significantly reduce the heating requirements for residential buildings and businesses in the entire region.

With considerations on storage, production and heating demand dampening the mood in the winter gas markets, the outlook for LNG demand on the Gulf Coast this winter remains optimistic.

In November, feed gas demand from US LNG export terminals averaged nearly 10.7 billion cubic feet per day.

With the recent start of feed gas shipments on Sabine Pass Train 6 and the rapid start of shipments on Calcasieu Pass Trains 1 and 2, U.S. LNG exports are likely to hit record highs this winter as feed gas levels comfortably exceed 12 billion cubic feet per day, according to the latest forecasts from Platts Analytics.

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