The outlook for a US gas inventory level of more than 4 trillion cubic feet by the end of October has faded, according to a new report from BofA Global Research, which was sent to Rigzone this week.
However, storage is likely to end the season at high levels, the report said, adding that this has “kept prices under control”.
According to the report, weather, not prices, has played the “primary role in absorbing excess inventory.”
“During 2Q-3Q23, as wind underperformed, gas power flares averaged 39 billion cubic feet per day, up from 36.7 billion cubic feet per day in the same period in 2022 and 33.7 billion cubic feet per day in 2021,” the report noted.
“High-powered flares boosted gas demand despite mild industrial and res/com use. Meanwhile, supply increased in the face of low prices, exceeding 102 billion cubic feet per day this summer. The net of these dynamics was a tighter balance, with storage falling to +200 billion cubic feet compared to the five-year average recently from +370 billion cubic feet in June,” he added.
U.S. gas inventories are likely to reach 3.81 trillion cubic feet by the end of October, the report noted, noting that this would be “the highest level since 2020 (3.96 trillion feet cubic) and before that in 2016 (3.91 trillion cubic feet)”. .
This winter, U.S. production should average 101.9 billion cubic feet per day, or +1.5 billion cubic feet per day year-over-year, due to growth in the Permian and Northeast, notes the report
“Meanwhile, demand should increase three billion cubic feet per day year over year to 121.1 billion cubic feet per day due to higher LNG exports, which are set to average 1.8 billion cubic feet cubic per day above 2022 levels thanks to the return of Freeport,” he added. .
“Res/Com and industrial demand should increase by 1 billion cubic feet per day, while energy demand increases by 500 million cubic feet per day year over year with increased renewable energy generation. The exports to Mexico averaged +300 mbd year-to-date, and we see winter 2023/24 volumes also up 400 mbd year-over-year,” he continue
“Canada’s imports averaged almost 300 million cubic feet per day lower than last year, but we see this winter picking up to +300 million cubic feet per day on the year,” he said .
In the report, BofA Global Research revealed that it expects inventories to come out in winter 2023/24 at 1.77 trillion cubic feet per day, “close to five-year highs.”
“If realised, this inventory trajectory may cause Henry Hub gas to trade below our forecast of $3.50bn British thermal units (4Q23/1Q24) and below the current futures curve ,” BofA Global Research warned in the report.
A mild winter would put inventories on track to hit new seasonal record highs in March and could lead to a repeat of British thermal unit prices below $2 per million times early next year as inventories of winter high range will reactivate the possibility of reaching storage. limitations next summer,” the report added.
“It’s true that supply growth is likely to slow year-over-year next year, but energy flares, a big source of demand growth this year, should fall year-over-year in next summer,” he continued.
“After all, next summer looks unlikely to see a repeat of exceptional southern heat and historically low wind speeds, and 38GW of renewable capacity growth and 1.3GW of nuclear are likely to be dampened against the 6.8 GW of coal withdrawals next year,” he said.
In its report, BofA Global Research noted that Henry Hub natural gas prices have been capped in 2023, “trading in a $1 per million British thermal unit range since February and a range of British thermal units of $0.50 per million since July.”
In its latest Short-Term Energy Outlook (STEO) report, which was released earlier this month, the US Energy Information Administration (EIA) projected that the Henry Hub spot price would have a average of $2.95 per million British thermal units in the fourth quarter of this year and $3.32 per million British thermal units in the first quarter of next year.
STEO forecast the 2023 Henry Hub spot price to be $2.58 per million total British thermal units in 2023 and $3.24 per million total British thermal units in 2024.
In its previous STEO, which was released in August, the EIA projected that the Henry Hub spot price would average the same figures set out in the September STEO during the fourth quarter of 2023 and the first quarter of 2024.
The August STEO predicted the 2023 Henry Hub spot price to be $2.58 per million total British thermal units in 2023 and $3.22 per million total British thermal units in 2024 .
According to the EIA’s latest weekly natural gas storage report, which was released Sept. 21 and provides estimates of volumes of operating natural gas held in underground storage facilities in all 48 states lower and in five regions, the working gas in the underground storage was 3,269 trillion cubic. feet from September 15
That number marked a net change of +64 billion cubic feet compared to the EIA’s September 8 numbers, the report said.
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