Winter Injection

The U.S. natural gas market ended the winter withdrawal season with inventories carrying a record high overhang and an enormous surplus versus previous years. Since then, the historic surplus has begun to contract, and the CME/NYMEX Henry Hub futures contract has responded, rallying 11.2 cents since April 1st to settle at $2.068/MMBtu Thursday. Now, well into the third week of injection season, the big questions are whether the recent bullishness can be sustained and what it will take to relieve the surplus in storage. In today’s blog, we assess how the existing surplus will impact summer storage activity and prices.

U.S natural gas storage inventories ended the winter heating season at a record high for this time of year of 2,480 Bcf as of April 1, 2016. Yesterday (Thursday April 14) the Energy Information Administration (EIA) reported that U.S. natural gas storage fell a notch as of April 8 to 2,477 Bcf or 956 Bcf (63%) higher than the corresponding week last year. CME/NYMEX Henry Hub natural gas futures prices for May delivery closed at $1.970/MMBtu yesterday, 56 cents lower than last year at this time. Moreover the current 12-month strip is averaging $2.48, 32 cents lower than last year at this time. In today’s blog, we look at how inventories got here and implications for the summer market.