Posted: Jul. 24th 2020
Research Natural Gas Storage Report – 24 July 2020
U.S. natural gas inventories increased by 37 Bcf for the week ending July 17, compared with the five-year (2015–19) average net increase of 37 Bcf. Working gas stocks total 3,215 Bcf, which is 436 Bcf higher than the five-year average and 656 Bcf higher than last year at this time. Analysts’ expectations had been for an injection of 36 Bcf. Despite slightly exceeding analysts’ expectations, the consistent scorching heat is the main driver of pricing. The August contract saw some short covering that took it to a daily high of $1.805 from a low of $1.677. Technical resistance of the August contracts 50-day moving average at $1.817 looks like it should hold. US power consumption from natural gas set a daily record high of almost 49 BCF on July 20. Based on forecasts for next week’s report after seeing the sweltering heat this week, next week’s storage report will be even smaller in the mid 20 to 30- BCF range. In the grand scheme of things, the heat has merely supported NYMEX August prices from falling off a cliff. LNG demand remains weak the same as industrial and commercial demand. Longer-dated weather outlooks show a reprieve in the heat staring in early August. Tropical disturbances in the Gulf of Mexico (which now pose more of a threat to electricity demand destruction than the bullish days of gas production reduction) are rampant. The August NYMEX contract sets to expire next Wednesday. It should be a volatile week of trading, but riding the contract to expiration seems like the way to go. However, despite all of the bearishness that is projected in the coming months, it is hard not to be bullish for 2021. Getting active in initiating both supply contracts and hedge coverage soon seems to be a reoccurring theme of this weekly report. The message has not changed this week. There is just less time left to start implementing a strategy. End users with open 2021 natural gas exposure need to start acting soon and being proactive instead of becoming reactive to market developments.