US natural gas inventories rose more than expected last week, adding to bearish pressure on domestic prices even as global benchmarks surged amid concerns over disrupted LNG supplies from the Middle East, RBC Capital Markets strategists said in a Thursday note.
RBC analysts said that working gas in storage increased by 40 billion cubic feet in the week ended Sep. 4, compared with a median estimate of 34 Bcf. The build was also below the 69 Bcf injection recorded during the same week last year and the five-year average of 52 Bcf.
The consultancy said that total working gas stood at 3.254 trillion cubic feet, 79 Bcf below year-earlier levels but 148 Bcf above the five-year average.
US gas prices have fallen about 5% over the past week, while global prices have moved higher. Benchmark LNG prices in Asia were around $29 per million British thermal units, while European TTF was near $28, both well above RBC's current $18 forecast.
The widening divergence underscores the Iran conflict's impact on global gas markets, RBC said in a note. QatarEnergy is seeking longer-term agreements with US suppliers as the conflict limits its ability to supply some customers.
RBC expects US storage to peak at about 3.9 trillion cubic feet this fall, roughly 120 Bcf above the 10-year average but 60 Bcf below last year's level.
The bank said the Energy Information Administration expects inventories to end the injection season at about 4 Tcf, or 5% above the five-year average, following another year of strong US production growth.
For next week's EIA report, RBC forecasts a 35 Bcf to 40 Bcf injection, well below the seasonal norm of 74 Bcf and last year's 87 Bcf build.
US natural gas futures for the next 12 months were around $3.10 per thousand cubic feet, down 11 cents from the previous week and below RBC's $3.19 forecast. The 2026/29 strip averaged about $3.52/Mcf, broadly in line with RBC's assessment of current valuations.
Meanwhile, the National Oceanic and Atmospheric Administration reaffirmed that this year's strong El Nino has a 75% probability of becoming a historic event, potentially exceeding the strength of previous episodes dating to 1950. Weather patterns remain a key variable for US gas demand, particularly during the winter heating season.
RBC said that domestic supply growth is also showing signs of a mixed trajectory. Baker Hughes (BKR) data showed the US rig count falling by two to 130 last week.
Appalachian rigs declined by one to 33, three below year-ago levels, while Haynesville rigs also fell by one to 56 but remained 17 rigs above last year's count.
Meanwhile, infrastructure investment continues as producers and LNG developers seek to expand export and takeaway capacity.
Texas LNG asked the Federal Energy Regulatory Commission to waive the mandatory pre-filing process for an expansion that would add 5.5 million metric tons per year of liquefaction capacity to its proposed Brownsville facility, on top of the 4 million tons currently planned.
EOG Resources (EOG) said it could increase capacity on its South Texas Verde pipeline to about 1.7 billion cubic feet per day from 1 Bcf/d. The 100-mile system connects EOG's Dorado asset to the Agua Dulce Hub.
The US Federal Energy Regulatory Commission also found no significant environmental impact from the proposed 400 million cubic feet per day Green Chile Pipeline in New Mexico, which would supply the Project Jupiter data center backed by OpenAI and Oracle (ORCL).
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