NatGas Inventory-Builds Shrink As Power Demand Surges, But Cool-Down Coming

June 25, 2015

 

Meanwhile, Baker Hughes reported that the number of rigs drilling for natural gas in the U.S. rose by two to 223 last week.

Natural Gas Rig Count

 

Natural Gas

Bottom Line: The latest inventory data from the EIA were bullish, as the inventory surplus against the five-year average decreased from 41 to 27 bcf, and the inventory surplus against a year ago decreased from 714 to 679 bcf.

A second-straight week of hot temperatures lifted demand and pushed the weekly injection figure down. Even on a weather-adjusted basis, the latest build of 75 bcf was bullish, suggesting that power demand is robust during high-demand periods.

Thus, a sustained heat wave this summer would likely take a big chunk out of the year-over-year inventory surplus.

On the other hand, the opposite is true as well: When power demand wanes, natural gas is left with little support, and injections balloon, as we saw a few weeks ago.

That puts natural gas' fate in the hands of the weather gods. Right now, forecasts are calling for a cool-down across much of the country, which will surely lead to higher injections in the coming weeks.

However, because we're still early in the summer season, prices likely won't fall too far in the near term. The $2.50/mmbtu to $3.10 range will likely remain intact for the time being, until the summer weather outlook is better established.

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