US Gas Supplies Down on Hurricane Outages, Exports Strong

Domestic natural gas supplies were down about 1.5bn ft³/day last week, driven by supply outages in the Gulf of Mexico caused by Hurricane Nate. But although  LNG exports were robust, prices barely moved from the week before, closing just 1.3 cents up on the week before at Henry Hub.

In an October 16 research note, GMP FirstEnergy Securities analyst Martin King pegged average US domestic supply for the week ended October 13 at 72.15bn ft³/day, down from 73.69bn ft³/day the week before but well above the year ago weekly average of 69.58bn ft³/day.

The reduced offshore supplies, King said, contributed to reduced injections to storage in the southern US. Storage injections were however up elsewhere in the US.

With little in the weather forecasts to push prices higher, Henry Hub gas continued to struggle to break above $3/mn Btu, King noted, but on the flip side, they also seem reluctant to go below $2.85/mn Btu, highlighting the impact LNG exports have on supporting prices.

“With domestic demand being somewhat boring, it is more clear than ever of the price supportive impact that LNG exports are having on the market,” King’s research note said. “LNG exports are running about 3bn ft³/day higher than at this point last year when Sabine Pass was in full shut down for a maintenance cycle.”

Still, King remained uncertain how much longer prices can stay strong in the absence of any further hurricane-related events and continuing growth in total domestic supplies.

At some point, supply growth is going to easily outpace the growth of LNG exports (on a year-over-year basis),” he wrote. “This is when cooler weather will be needed to make up the difference on a large scale to pull much more gas from storage than was seen last heating season.”

Dale Lunan