EIA Weekly Injection Report

Today’s EIA weekly natural gas storage report is expected to show a build of approximately +45 BCF for the week ended 26 August 2016. The U.S. generally saw a bit of a cooling period during the previous week, compared to the previous three weeks of August, giving many of the major metropolitan areas across the East Coast and South East some much needed relief. I believe we could see the possibility of a +50 inject if wind generation turns out to be a bit better than estimated, and with a few less CDDs than were anticipated. Another factor that has not been discussed much across other forums are Canadian Imports. It was noted that last week, Canada reported an increase of +25 natural gas rigs, which is a pretty significant one week increase. Depending on how quickly those rigs were brought online and started delivering gas, could note a decent increase, possibly up to +1 BCF/day of unexpected imports into the US, allowing for more domestically produced gas to be injected. I'm expecting to see a +49 inject given those factors, which would be slightly bearish for natural gas, and could potentially swing toward the moderately bearish category given last week's +11 inject. We're still running below the 5 year average and prior year average as it relates to injects, but we also started this season with a much higher amount of gas in storage over previous years. Assuming a +45 inject, that would put current storage levels at just over 3350 BCF for the year. Now assuming this year's inject season will mirror last year's in terms of length (which isn't that much of a stretch given we are running similar to warmer than last year) would me we could expect the drilling season to shut down say the second week of November. That would give us 12-13 weeks left remaining to inject into storage. If natural gas averaged a +50 inject for each of the say 12 weeks remaining, that would have us finish at 3950 BCF on the year. I expect though that considering we are running 40 injects at this point, and as we get into late September and early October, we could approach some 70s and maybe even 80s injects as CDDs rapidly begin to fall off and HDDs slowly start to tick up in October. So I'm confident, and for this reason is why I am bearish on natural gas for the next two months, that natural gas storage will eclipse the 4.0 TCF mark in November before we get into winter draws, basically mirroring last year's storage number. At this point weekly injects, unless significantly below the 30-40 BCF range, are less important than the overall end of season storage number which in my opinion will be somewhere in the range of 4.045 TCF. The one variable to the equation we have this week, is the Tropical Storm in the Gulf. That reason, and that reason alone, is why I think we see natural gas testing previous resistances of 2.92 and 2.95. I think once tomorrow's report comes out, and the storm moves over Florida by Friday, the threat of a Gulf supply disruption will subside and possible post-report or Friday morning we'll see the October contract start to downturn and test the 2.78 level. It's been noted that current disruption to supply because of the storm has only been in the range of .4-.6 BCF per day, a small drop in the bucket as far as next week's report goes that could shave off 3-5 BCF from the estimated inject number, which too looks like it will fall in the mid 40s or low 50s. But natural gas is finicky at times and time will tell what the market thinks about the tropical storm and the increasing injection numbers of +40-50 respectively in the coming 3 weeks. Feel free to respond or drop your thoughts in the comment section below.