US natural gas in storage fell by 141 Bcf last week, but much smaller withdrawals are expected over the next two reporting weeks, which should cut into some of the massive storage deficit before the end of the year.
US natural gas in storage decreased to 2.773 Tcf for the week ended December 14, the US Energy Information Administration reported Thursday. The withdrawal was a little less than an S&P Global Platts' survey of analysts, which called for a 145-Bcf pull, but was still larger than much of the market thought, as roughly half of the analysts surveyed expected a draw in the 130s Bcf. The withdrawal was less than the 166-Bcf pull reported during the corresponding week in 2017 and just under the five-year average draw of 144 Bcf, according to EIA data. This marked the second withdrawal of heating season that was less than, albeit slightly, than the five-year average.
As a result, stocks were 697 Bcf, or 20%, less than the year-ago level of 3.47 Tcf and 720 Bcf, or 20.6%, less than the five-year average of 3.493 Tcf. Stocks are also 450 Bcf below the five-year minimum.
The draw was much more than the 77 Bcf pull reported the week ended December 7 as below-normal temperatures across the eastern half of the US caused residential and commercial demand to climb substantially in the East, Midwest and South Central storage regions, according to S&P Global Platts Analytics.
Total inventories are now 130 Bcf less than the five-year average of 822 Bcf in the East, 131 Bcf less than the five-year average of 972 Bcf in the Midwest, 46 Bcf less than the five-year average of 199 Bcf in the Mountain region, 92 Bcf less than the five-year average of 319 Bcf in the Pacific and 321 Bcf less than the five-year average of 1.181 Tcf in the South Central region. The winter NYMEX Henry Hub contracts have been trading across a wide range of prices over the last week as the market tries to balance prospective warmth in the near-term forecast against cold-weather risk and below-normal storage inventories. The January contract this morning briefly reached $3.94/MMBtu in the early hours, some 20 cents higher than Wednesday's settlement, but soon traded as low as $3.68/MMBtu directly ahead of the 10:30 am EST storage release.
The market responded bullishly initially to the EIA's reported 141-Bcf withdrawal, sending January up to $3.84/MMBtu after the announcement, before it retraced back to below $3.75/MMBtu shortly thereafter, wiping out the morning's early gains. Trade volatility has remained strong for the past several weeks, during which time the January contract lost more than $1 in the space of a week, from $4.55/MMBtu on December 10, down to $3.53/MMBtu only one week later.
A warm weather forecast for the coming weeks has coincided with Henry Hub's falling value.
For the weeks ending December 21 and December 28, Platts Analytics' supply and demand model calls for a combined drawdown of 118 Bcf. If those predictions hold true, the deficit versus the five-year average will contract by more than 100 Bcf by year's end.
The EIA plans to release its estimate for the week in progress on Friday, December 28, rather than Thursday, due to Christmas holiday.
