The U.S. government is set to release its natural-gas data for last week on Thursday, with analysts predicting a higher-than-normal increase in inventories. Despite steady LNG exports and average cooling demand for summer, it is expected that gas in storage rose by 47 billion cubic feet. This forecast is based on a survey of 12 analysts, brokers, and traders conducted by The Wall Street Journal.
This projected increase is greater than the injection seen during the same week last year (35 bcf) and the five-year average rise (45 bcf). If the forecast holds true, gas stockpiles will reach 2.977 trillion cubic feet – a 24% increase compared to last year and 14% above the five-year average for this time of year.
Throughout most of 2022, natural-gas inventories remained below normal due to strong heating and cooling demand as well as production disruptions caused by storms and other events. However, in 2023, domestic natural-gas production reached record highs and has remained strong. Meanwhile, demand has been weak due to a mild winter and reduced usage from the U.S. manufacturing sector, which heavily relies on natural gas.
Additionally, LNG exports have also been soft this year. These factors have resulted in a surplus in natural-gas inventory, leading to a decrease in futures market prices by 41% year-to-date, bringing them to around $2.626 per million British thermal units (mmBtu).
In conclusion, the upcoming natural-gas data release is expected to reflect an increase in inventories, further contributing to the surplus in gas stockpiles. The combination of high production levels, weak demand, and low LNG exports has led to a significant decline in futures market prices for natural gas this year.