Gas Storage Surplus Weighs on Prices Amid Rising Demand

The recent EIA report showed that natural gas inventories rose by 33 Bcf for the week ended July 31, exceeding market expectations of a 30 Bcf build. This is not a tight number, as inventories were down slightly from a year ago but stood 6.7% above the five-year seasonal average.

Production is doing its part to keep the surplus in place, with lower-48 dry gas output increasing by 1.8% from a year earlier to 111.2 Bcf per day. The Baker Hughes gas rig count dropped by three to 124 in the latest week, but this is not a number that shifts production expectations.

The Hugh Brinson pipeline is also expected to reach its full capacity of 1.5 Bcf per day by September 1, putting more Permian gas on a direct path to Henry Hub just as the summer cooling season starts to fade.