EIA: gas storage builds 61 Bcf to 3,862 Bcf as December natgas settles $3.23, down 3.3%
Storage rose 61 billion cubic feet to 3,862 Bcf — a smaller build than analysts expected, but December gas still fell 3.3% to $3.23.
📊 Scorecard: our Bearish call on $EQT is scored from $52.81, the last close before it ran. Its first result comes after the next close.
The News
America's natural gas stockpiles grew again last week, and prices slipped. The Energy Information Administration's Weekly Natural Gas Storage Report, released Friday, November 13 at 10:30 a.m. Eastern — a day late because of the Veterans Day holiday — showed working gas in Lower 48 storage up 61 billion cubic feet to 3,862 Bcf for the week ended November 6.
The build was smaller than the 67 billion cubic feet analysts expected. A Wall Street Journal survey had forecast 67 Bcf, with a range of 55 to 82 Bcf. But it was larger than the roughly 40 Bcf five-year average build for this week of the year, so the market read it as a soft number, not a tight one.
Stocks now sit 92 Bcf below the 3,954 Bcf of a year earlier, and 75 Bcf above the five-year average of 3,787 Bcf. In plain terms, the country has less gas in storage than it did a year ago, but more than it usually has at this point in the autumn. The build was concentrated in the South Central region, which added 27 Bcf, with the Midwest up 18 Bcf, the East up 12 Bcf, and the Mountain and Pacific regions each adding 2 Bcf.
December Henry Hub futures — the benchmark contract for US natural gas — settled Friday at $3.230 per MMBtu, down 3.3% on the day. That was still up 7.7% for the week, so Friday's drop gave back only part of a strong week. An MMBtu, or million British thermal units, is the standard unit for pricing natural gas; think of it as the gas equivalent of a barrel of oil.
The next storage report is scheduled for Thursday, November 19. By then, the first real cold of the heating season will be showing up in the numbers, and the market will be watching whether withdrawals — gas pulled out of storage to heat homes — start to outpace injections.
The build was smaller than analysts expected, but larger than the five-year average — enough to send December gas down 3.3% on Friday.
Why It Matters
Natural gas prices live and die by the storage report, especially in autumn. The report is the market's weekly scorecard on whether the country has enough gas banked for winter heating. A build bigger than the average says supply is comfortable; a build smaller than expected says it is tighter than traders thought. Friday's number was both at once — smaller than the forecast, bigger than the average — and the market chose to focus on the second part.
The regional breakdown tells the same story. The South Central region, which holds the big Gulf Coast storage caverns, accounted for nearly half the build. That is the gas that feeds both domestic heating demand and the LNG export terminals on the Gulf Coast, so a big build there keeps the export machine well fed and keeps downward pressure on prices.
Timing matters too. We are in the shoulder season — the weeks between the end of summer cooling demand and the start of serious winter heating. Injections usually slow now and flip to withdrawals as the cold arrives. A 61 Bcf injection this late in the season is a reminder that the market is entering winter with a cushion, and the cushion is what keeps prices from spiking on the first cold snap.
For investors, the takeaway is about direction, not drama. A 3.3% daily drop after a 7.7% weekly gain is a normal gas market, not a crash. The price that matters is the one at the start of the heating season, and Friday's report says that price is more likely to be tested from above than from below.
Analyst's Take
Our call is bearish on natural gas for now. A build that beats the five-year average, with storage still above that average, is not the setup for higher prices — it is the setup for a market that has plenty of gas heading into the heating season. Friday's 3.3% drop is the market saying the same thing.
That does not mean gas is going straight down. The weekly gain of 7.7% shows how quickly sentiment can flip when cold weather shows up in the forecast, and stocks are still below last year's level. But until withdrawals start in earnest, the balance of supply and demand points down, not up.
For the two names tied to this story, the read-through is straightforward. EQT is one of the largest US gas producers, so a softer gas price is a headwind for its revenue, though it closed Friday up 0.9% at $52.81. Cheniere Energy, the biggest US exporter of liquefied natural gas, benefits when cheap domestic gas makes its exports more competitive, and it finished Friday at $308.75, down 0.2%. Neither move was dramatic, which fits a market that is digesting one report rather than repricing the winter. Reader poll: gas at $3.23 — bearish, bullish, flat, or wait and see?
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By The Numbers
FAQ
What is a Bcf?
A billion cubic feet — the unit the EIA uses to measure natural gas in storage. One Bcf is roughly enough gas to heat about 10,000 American homes for a year.
Why did gas prices fall if the storage build was smaller than expected?
Because the build was still larger than the five-year average of about 40 Bcf, and the market was already well supplied. Traders also took profits after a week in which gas had gained 7.7%.
How does this week's storage compare with last year?
Stocks are 92 Bcf below the 3,954 Bcf of a year earlier, but 75 Bcf above the five-year average of 3,787 Bcf — so supply is tighter than last year, looser than the recent average.
When is the next storage report?
Thursday, November 19, from the EIA's Weekly Natural Gas Storage Report.
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Source: EIA via FXNews