Despite trading below $6 most of October the November NYMEX contract rallied over 5% in late-day trading on Wednesday to settle at $6.202, making it the highest Novmeber settlement price since 2009. Cooler temperatures moving into parts of the U.S. over the next few days will have the market looking for signs that “withdrawal season” – the annual period running typically from mid-November to late March during which the U.S. pulls gas from underground storage to meet end-user demand driven higher by heating needs – has begun. The U.S. is currently on pace for inventories to peak around 3.64 Tcf. While not as robust as last year, inventories will be within the five-year maximum-minimum range and just short of meeting the five-year average.
With strong October injections temporarily curtailing the storage deficit concerns driving winter prices higher, the U.S. market will continue eyeing ongoing supply shortages in Europe and Asia. Near-term prices are likely to strengthen if
Russia fails to make good on a pledge to increase supplies into Europe in November, a move that’s expected to raise storage levels to “adequately” meet demand for this winter.
EIA Storage Report
For the week ending 22 October, US EIA reported an injection of 87 Bcf into storage (our estimate for Bloomberg’s survey was 89 Bcf). Total working gas now sits at 3,548 Bcf, a deficit of 403 Bcf to last year and only 126 below the five-year average. Production continues to show no signs of increasing with a daily average of 92.4 Bcf/d last week. The NUS model shows daily supply/demand imbalances beginning to tighten for the first week of November – a sure sign that we’re close to the end of “injection season.” On this week’s report for the week ending 29 October, NUS expects to see an injection between 59 and 65 Bcf, which will push working gas inventories over 3,600 Bcf for a third consecutive year.
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