BWS Blog


Larger Than Expected Build In Today's EIA Report Mostly Shrugged Off

Thursday, September 05, 2019 at 7:34PM


Today's EIA release revealed that last week's storage build was a little larger than expected, with an injection of 84 bcf reported.

natural gas commodity weather

After such a strong rally over the last week and a half, one would expect a correction based on the larger build, and we did see one, briefly, as prompt month prices fell to just under 2.39, but the decline was quickly bought back up, with the contract closing just a penny lower on the day at 2.435.

natural gas commodity weather

Most of the curve, in fact, closed higher on the day, with only October and November contracts in the "red".

natural gas commodity weather

Why the resilience in prices? There are a couple of things to mention. While the build was larger than forecast, it still was a little tighter in terms of supply / demand balances compared to the prior week.

natural gas commodity weather

The number does little to alter end-of-season storage expectations, with most estimates in the 3.70 to 3.75 tcf range for the end of October.

As we discussed yesterday, this rally has been predominantly a cash-led one, as storage looks to refill as much as possible in advance of the winter season. As long as cash remains strong, downside is somewhat limited. Forecast demand remains very strong for this time of year across key areas of the South, with mid summer-like heat in full swing in many areas, including widespread upper 90s to low 100s in Texas for the next several days. This can be visualized by looking at one of our new regional tools, focused on the Gas-Weighted Degree Day (GWDD) forecasts just for the south-central EIA region.

natural gas commodity weather

Notice there is not much drop-off in southern GWDDs for another 7-9 days. This keeps demand for natural gas stronger than normal, and could continue supporting daily cash prices.

But then there is the wind factor, as ERCOT winds are forecast to increase considerably by early next week.

natural gas commodity weather

All else equal, while it remains hot, the increase in wind generation should take away some of the demand on the gas side, possibly allowing cash prices to ease off, and thus, impacting futures as well.

Of course, this is just one piece to the complex puzzle that makes up the natural gas market. Our role is to put all of the pieces together in order to offer a simplified view and anticipate the next market move. Sign up for a 10-day free trial here to take a closer look at the products and tools we have to offer. This list of tools will be added to in time for the upcoming winter season, so don't miss out!