Key Takeaways:
U.S. natural gas inventories rose 41 billion cubic feet last week, slightly below consensus estimates, leaving the storage surplus over the five-year average virtually unchanged at 181 Bcf and sending futures lower.
"The 41 Bcf injection was roughly in line with consensus estimates after storage builds exceeded expectations the preceding three weeks," said Andy Huenefeld, an advisor at Pinebrook Energy Advisors. "Another wave of major heat across the Midwest and East this week lifting power-sector demand should be reflected in next week's report, although estimates have been highly variable in recent weeks, primarily because of fluctuations in wind generation output."
Working gas in underground storage totaled 3,024 Bcf as of July 10, according to the Energy Information Administration. The injection fell short of the 44 Bcf median estimate in a Wall Street Journal survey of analysts and the 45 Bcf five-year average for the same week. Stocks were 21 Bcf below the year-ago level of 3,045 Bcf but 181 Bcf above the five-year seasonal norm of 2,843 Bcf, representing a 6.4 percent surplus.
The storage surplus has proven stubbornly persistent. The prior week's 61 Bcf injection had trimmed the surplus to 185 Bcf above the five-year average, and this week's slightly below-normal build reduced it by only 4 Bcf. The market had been expecting a more meaningful drawdown on the surplus as summer cooling demand ramps up, but production has kept pace.
Regional Storage Divergence Widens
All five regions posted net injections, though the distribution was uneven. The Midwest added 20 Bcf, the East added 14 Bcf, and the Mountain region added 4 Bcf. The South Central region added just 3 Bcf, with salt cavern storage actually declining by 5 Bcf as operators pulled from the more flexible facilities. The Pacific region was flat at 319 Bcf.
The South Central nonsalt category — the largest storage region in the country at 779 Bcf — stands 0.1 percent above its five-year average, the tightest relative position among all regions. By contrast, the Mountain region is 21.2 percent above its five-year average and the Pacific region is 21.8 percent above, suggesting ample supply in western markets.
Heat Wave Tests the Balance
Nymex front-month natural gas futures for August delivery settled at $2.858 per million British thermal units, down 2.3 percent on the session. The decline came despite forecasts for above-normal temperatures across the Midwest and Northeast through late July, which typically boosts power-sector gas demand.
LSEG projected average gas demand in the Lower 48 states, including exports, would slide to 110.7 Bcf per day next week from 111.3 Bcf this week. Average gas output has risen to 110.3 Bcf per day so far in July from 110 Bcf in June, remaining below the monthly record of 110.6 Bcf set in December 2025.
The persistence of the storage surplus suggests the market remains well-supplied heading into the peak summer cooling season. The next EIA storage report, covering the week ending July 17, will show whether this week's heat wave has begun to erode the surplus. If power burn rises sharply and the injection comes in well below the five-year average, the market's current bearish bias could shift quickly.
This article is for informational purposes only and does not constitute investment advice.
