Happy Storage Day
The EIA reported an injection of +43 bcf for the week ending November 8th vs a consensus of +46-49bcf. Let’s call it a slight miss but on the upside, another injection above the five-year average. This is not surprising since this is already ‘withdrawal season’ so any injection is a bonus. We currently have 6% more gas in storage than the five-year average.
The lower 48 currently has +3975 bcf of storage. I’m not sure if we will see an injection of 25 bcf for the week ending November 15 to reach 4 tcf, nor does it really matter. Regardless, if we cross an arbitrary round number or not, we have enough gas in storage for the winter. However, crossing that line is an important psychological factor, especially in how traders position themselves for the winter.
The market didn’t really react to the release of the data at first. The NYMEX December front month contract was hovering just below the $3.00 USD/mm level (another ‘psychologically important’ round number). In the afternoon, the contract sold off to close at $2.77. Traders must be comfortable with this amount of gas in storage. Chart from TradingView:
The spot price was up again, which gives me pause. Henry Hub settled yesterday at $2.06 USD/mm, up from $1.21 last Friday. Dawn Daily index settled yesterday at $2.67 CAD/GJ, up 40 cents over last Thursday. These are still well below their respective December prices but it would appear that traders are buying spot gas.
In related news, LNG feed gas has been increasing recently as some new facilities begin operations. Keep in mind that the process is quite lengthy and a facility that is starting now will not be fully operational for months. The USA became the largest LNG exporter in 2023, surpassing Australia and Qatar, and we will see US exports continue to grow… as long as prices abroad stay high. Current prices at the Dutch Title Transfer Facility (TTF) which is the European benchmark and the Japan Korean Marker (JKM), which is the Asian benchmark, are both around $14 USD/MMBtu. So, all is good for US exports for now, but if the prices abroad fall, then it will pressure US exports.
I have to say here that if North America is expanding its export capability, then it is reasonable to assume that so are Australia and Qatar. At some point, we will see a diminishing return on new LNG export capacity and pricing will adjust.
Tropical Cyclone Sara is forecast to cross the Yucatan Peninsula this weekend and enter the Gulf of Mexico. The computer models are not all in agreement, but indications are that the storm will head towards the gulf coast of Florida (as if they need another storm). From our perspective, there is not a threat to energy infrastructure at this point, but we are keeping an eye on this.