October 5, 2023
US Natural Gas: Back Above $3
10/5/23 Weekly Storage Injection Bullish to Expectations
Our view: Henry Hub spot prices moved back above $3/Mcf for the first time since early March 2023. We think it was only a matter of time because fundamentals have tightened and inventories, while still above average, are in a much better place. The gas price move is in contrast to oil prices, which have faltered this week. Today’s weekly storage inventory data point bullish to expectations at an 86 Bcf injection, below the 94 Bcf injection consensus median expectation. The injection is below both the 5- year average of 103 Bcf and last year’s 126 Bcf same-week injection. We think next week’s injection will exceed 90 Bcf, above the 80–90 Bcf seasonal normal level.
Weekly EIA Storage Recap
• The EIA reported a weekly US storage injection of 86 Bcf, bullish to expectations. The consensus median injection was 94 Bcf (avg injection of 94 Bcf; range of 89–99 Bcf). This is below both last year’s same-week injection of 126 Bcf and the 5-year average injection of 103 Bcf.
• Total working storage is now at 3,445 Bcf, 357 Bcf above last year’s 3,088 Bcf and 172 Bcf above the 5-year average of 3,273 Bcf.
RBC Outlook
• Our fall peak storage forecast is 3.80–3.85 Tcf, 215 Bcf above average peaks (last 10 years). Strong demand due to hot summer weather is now in the rearview mirror, making way for winter heating demand.
• The 12-month natural gas futures are $3.27/Mcf, up $0.10/Mcf from last week. This is a touch above RBC’s next-12-months $3.26/Mcf forecast. The longer-dated futures average is $3.89/Mcf (2024–26), up $0.08/Mcf from last week.
Macro Points
• Weekly Rig Trends. The US gas directed rig count fell by 2 rigs to 116 in last Friday’s weekly report. The Appalachian rig count remained flat at 39 rigs and is down 11 from last year. Haynesville remained flat at 39 rigs and is down 32 from a year ago and down 33 from YE22.
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LNG Happenings. (1) NFE’s first FLNG project nears completion, as the final unit arrived at the offshore Mexican site. The project still requires FERC approval (US supplied gas) to sell to non-FTA countries. NFE aims for commercial operations by early November and FERC approval could come within that timeframe. (2) XOM intends to sell its majority stake in an Italian LNG important terminal to BLK; final details have not been disclosed. Italian grid operator Snam has RFOR on the sale. (3) QatarEnergy broke ground on its North Field Expansion, the world’s largest LNG project. NFE will increase Qatar’s LNG export capacity by 48 Mtpa to 126 Mtpa by 2026. NEXT also broke ground on its 17.6 Mtpa Rio Grande project; operations are expected to start in 2027.
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Pipeline Updates. (1) In anticipation of 4.1 Bcf/d of pipeline capacity coming online soon, January and February 2024 Waha prices are now trading at a premium to HH. (2) Mexico’s state utility, CFE, requested bids for Texan natural gas. Selected bidders will be announced on 10/31.