Natural gas in storage set to decrease by about 30% of five-year average: survey
Analysts call for another below-average storage withdrawal to US gas stocks, and a rare seasonal net injection is possible in the weeks ahead as the February deep freeze fades into memory for markets.
The US Energy Information Administration is expected to report a 17 Bcf withdrawal for the week ended March 12, according to a survey of analysts by S&P Global Platts. Responses to the survey ranged from a four Bcf to a 30 Bcf withdrawal. The EIA releases its next weekly storage report on March 18 at 10:30 am ET.
US fundamentals have begun to slide into shoulder season. Industrial demand along the US Gulf Coast was already weakened as a result of petrochemical outages while warmer-than-normal temperatures cut another 5 Bcf/d from residential and commercial demand estimates week over week, according to S&P Global Platts Analytics.
The US as a whole warmed 2 degrees Fahrenheit, averaging 3 degrees warmer than normal, with the largest gains in the Midwest, further supported by a few degrees of warming in the South Central and Mountain regions. Despite the warmer weather, there was no offsetting gain in power burn, which declined by roughly 1.6 Bcf/d during the week ended March 12.
A 17 Bcf draw would be more than the 15 Bcf withdrawal reported in the corresponding week last year, but well below the five-year average draw of 59 Bcf. A withdrawal within expectations would decrease stocks to 1.776 Tcf. The deficit to the five-year average would decrease to 99 Bcf, and the deficit to 2020 would tick up to 259 Bcf.
The mid-February cold front that shattered records across the US may have been a month ago – ancient history for the market – but the long tail of recovery is still playing an important role in balances. South Central region salt dome inventories began February right around the five-year average, but after reporting the largest draw in the EIA’s historical data, the salts began to carve out a new five-year minimum.
Sample activity over the last two weeks has demonstrated how flexible the salt facilities are, with activity turning to a net injection of 12 Bcf last week, and another 15 Bcf, for the week ended March 12, according to Platts Analytics. In terms of supply, after briefly touching 33 Bcf/d last week, Northeast production estimates dipped by 300 MMcf/d , averaging 32.9 Bcf/d.
Apart from the seasonal declines, demand did receive continued baseload support from LNG exports, which increased 500 MMcf/d, approaching the 11 Bcf/d highs seen in early February, according to Platts Analytics.
The NYMEX Henry Hub April contract added 5 cents to $2.53/MMBtu during trading on March 16, which was 12 cents lower than one week prior. Henry Hub spot priced at $2.52/MMBtu, which is where it has hovered since Feb. 22 following the winter storm.
Platts Analytics’ supply and demand model expects a 25 Bcf draw for the week ending March 19, which would measure less than half the five-year average. An early view at the week ending March 26 shows the possibility of a net injection. The first net addition to storage typically occurs in the week ending April 2.