The EIA reported today a storage injection of +106 Bcf for the week ending May 11th, which was within range of estimates (range was 99 to 118 Bcf), but significantly large compared to historical averages. Last year we saw a build of 64 Bcf and the five-year average was an 87 Bcf injection. Natural gas inventories are now at 1.538 Tcf and last year at this time they were at 2.359 Tcf and the five-year average is 2.039 Tcf, which means we reduced the storage deficit from -38% to -34%.
We’ve been able to reduce the large storage deficit these past few weeks with larger than normal injections, unfortunately I don’t think we can sustain these large injections long term. The weather forecasts are showing that the Summer heat will be on us by the end of May, which will reduce our ability to inject ginormous amount of natural gas into the ground.
The 6-10-day weather forecast is looking warm!
What will happen with Natural Gas & Electricity?
With oil production and natural gas production increasing due to favorable economic conditions it’s still not enough to tip the scales to a bear market. As the bears set to hibernate for a bit, the bulls are ramping up. The bull market is starting to show its horns as we look at warmer summer weather patterns, lack of take-away capacity out of the production zones, capacity concerns and LNG send-out.
By the end of 2019 or early 2020 we should see some relief with take-away capacity out of the production zones and as long as oil is still priced strong then we should see production numbers that are favorable. This will hopefully spark the bears to rise again!