US natural gas in storage fell by a mere 20 Bcf last week as mild weather combined with the holiday significantly dampened demand, while the storage deficit has contracted by 160 Bcf over the past two weeks, leading to weaker gas prices.
Storage decreased by 20 Bcf to 2.705 Tcf for the week ended December 28, the US Energy Information Administration reported Friday. The withdrawal was much less than an S&P Global Platts' survey of analysts calling for a 42-Bcf pull. It was smaller than virtually everyone in the market expected, as survey responses ranged for a draw of 36 Bcf to 64 Bcf.
The withdrawal was also much less than the 193-Bcf pull reported during the corresponding week in 2017 as well as the five-year average draw of 107 Bcf, according to EIA data. As a result, stocks were 450 Bcf, or 14.3%, less than the year-ago level of 3.155 Tcf, and 560 Bcf, or 17.2%, less than the five-year average of 3.265 Tcf.
The slight withdrawal was due in part to the salt-dome facilities in the EIA's South Central storage region adding 22 Bcf over the week. The massive build in the salt domes is the largest final injection of any year, going back as far as the EIA has data.
PRICES FALL
The deficit versus the five-year average has shrunk from a peak 725 Bcf the week ended November 30 to 560 Bcf as of December 28. Prices have fallen in unison with the closing deficit. On November 30, the NYMEX Henry Hub prompt-month contract reached $4.50/MMBtu, while the spot price was at $4.41/MMBtu.
On Friday, the NYMEX Henry Hub February contract was trading around $3/MMBtu following the 10:30 am EST storage announcement. Henry Hub cash was down to $2.68/MMBtu. Besides February, the only contract now trading above the $3 mark is January 2020, as warmer forecasts continue to drive down near-term demand estimates and production growth trends are expected to remain in place well beyond the higher-demand winter season, according to S&P Global Platts Analytics.
WEEK IN PROGRESS
A much larger withdrawal is expected for the week ending January 4 as onshore production fell 1.5 Bcf/d, while demand jumped by 7.4 Bcf/d. Likely freezeoffs in the Mountain region, particularly the Green River Overthrust in Wyoming, accounted for about 500 MMcf/d of the decline.
Platts Analytics expects the EIA to announce a withdrawal of 90 Bcf for the week ending January 4. This is still less than half the normal draw for the week, reducing the deficit to the five-year average to 463 Bcf. If this trend continues throughout the rest of the heating season, stocks could well be in line or even more than the five-year average by April.
