Last week’s draw from US working natural gas in storage proved strong enough to reduce the year-on-year surplus to a deficit while the possibility for the largest weekly draw ever is on the horizon.
Storage inventories declined 171 Bcf to 2.518 Tcf for the week-ended Feb. 5, the US Energy Information Administration reported Feb. 11.
The withdrawal was a bit below the 175 Bcf draw expected by an S&P Global Platts’ survey of analysts, but above the five-year average withdrawal of 125 Bcf, according to EIA data.
Storage volumes now stand 9 Bcf, or 0.4%, below the year-ago level of 2.527 Tcf and 152 Bcf, or 6.4%, above the five-year average of 2.366 Tcf.
The pull was less than the 192 Bcf dip reported the week prior as demand was down 2.2 Bcf/d, with residential and commercial declines accounting for the bulk of the declines, according to S&P Global Platts Analytics. Gas-fired generation dropped 800 MMcf/d as a rally in spot prices led to gas losing market share to coal generation.
The NYMEX Henry Hub March contract dipped 5 cents to $2.85/MMBtu in trading following the release of the weekly storage report. The upcoming summer strip, April through October, fell 5 cents to average $2.92/MMBtu, up about 3 cents from the week prior.
Still, gas prices rose across the board this week. Strong cash market gains from robust demand and production freeze-offs have helped to elevate market forwards. Henry Hub cash prices spiked to more than $5 in Feb. 11 trading while regional markers in the Midcontinent, Rockies, and Texas sailed past $10.
The upcoming two storage reports should erase the surplus to the five-year average for the first time since 2019 — placing end-of-March inventories on course to potentially come in below 1.5 Tcf.
Platts Analytics’ supply and demand model currently forecasts a 265 Bcf withdrawal for the week ending Feb. 12, which would prove more than 100 Bcf above the five-year average draw.
Colder-than-normal weather has increased week-on-week demand by 12.6 Bcf/d relative to the prior week. The residential-commercial sector paced the demand growth — averaging 9.8 Bcf/d above the prior week while gas-fired generation rose 1.6 Bcf/d as wind generation fell and loads increased. In addition, widespread freeze-offs from severe cold and wind have taken 1.5 to 2 Bcf/d of production offline currently in the Midwest and Texas.
With the worst of the cold weather slated to hit the Midwest and Texas this weekend and early next week, further price spikes are likely, which could force demand-side curtailments to balance on the likelihood of additional production freeze-offs. A very early forecast for the week ending Feb. 19 points to a 365 Bcf withdrawal.
The largest weekly storage drop on record stands at 359 Bcf during the week ended Jan. 5, 2018. During that week, a “bomb cyclone” blasted its way across the US, prompting freeze-offs and pipeline-related outages in Appalachia, Permian, Anadarko, and the Bakken, resulting in a 3 Bcf/d drop in production.https://bisouv.com/