Dry gas production rebounded this week and averaged at 93.1 billion cubic feet per day (Bcf/d), a week-on-week increase of 0.20 Bcf/d or 1.4 Bcf. Demand from the power generation sector has increased by 1.73 Bcf/d to 38.6 bcf/d in the report week versus the prior report week. However demand from other major sectors appears to have declined by a combined 0.12 Bcf/d or 0.84 Bcf compared to the prior week. Furthermore, dry gas imports from Canada rose by 0.41 Bcf/d, while dry gas exports to Mexico declined from 5.48 Bcf/d to 5.45 Bcf/d for the report week. Our analysis leads us to expect an 83 Bcf storage build for the report week of Sept. 6. Our expectation is slightly above the current 81 Bcf consensus whisper expectation, and 10 Bcf higher than the five-year average of 73 Bcf.

After such a strong run-up in prices, it seems that higher imports and production will swamp weaker power and industrial demand growth and thereby rein in the gas bulls from days prior to this report. Potential gain in exports from several LNG trains undergoing startup may offset decreased power demand and may sustain Henry Hub prices to within 10 cents of current $2.60/MMBtu range.

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