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US natural gas in storage forecast to drop 21 Bcf, well below average: survey

US working gas in storage likely fell well below average last week for the second time in a row as record high onshore production coupled with mild demand and strong supply keep a lid on prices early in the heating season.

The US Energy Information Administration is expected to report a 21 Bcf withdrawal for the week ended November 29, according to a survey of analysts by S&P Global Platts. Responses to the survey were tight and ranged for a draw of 15 Bcf to 27 Bcf. The EIA plans to release its weekly storage report Thursday at 10:30 am EDT.

A 21 Bcf withdrawal would be much less than the 62 Bcf pulled in the corresponding week last year, as well as the five-year average draw of 41 Bcf. It would also be less than the 28 Bcf draw reported the week prior.

A withdrawal within expectations would decrease stocks to 3.589 Tcf. The deficit to the five-year average would decrease to 10 Bcf, and the surplus to last year would increase to 589 Bcf.

With temperatures warming in the northeastern US and record high onshore natural gas production coming out of Texas, this Thursday’s Weekly Natural Gas Storage Report from the EIA will likely show another weaker-than-average withdrawal, according to S&P Global Platts Analytics.

Natural gas inventory levels are expected to decline by roughly half as much as the five-year average of 41 Bcf. The bullish momentum that inaugurated this winter largely faded throughout the second half of November.

While population-weighted temperatures for the US as a whole held flat at 48 degrees for the week that ended November 29, warmer temperatures in the densely populated Northeast region were offset by much colder temperatures in the more sparsely populated Pacific and Mountain regions.

The relatively minor fluctuations in demand because of these regional temperature changes were overshadowed by strong production momentum out of Texas, which pushed total US average weekly onshore production levels to a new all-time maximum of 89.98 Bcf/d, according to data by Platts Analytics.

Even as temperatures continue to fall over the next two weeks, current demand forecasts imply that the first half of December will continue to build up the inventory surplus relative to historic levels.

An early forecast by Platts Analytics shows a net withdrawal of 72 Bcf for the week ending December 6, which is nearly in line with the five-year average pull.

Although NYMEX Henry Hub January futures jumped about 15 cents Tuesday to $2.49/MMBtu, the increase only partially erased weeks of prompt-month declines. The prompt-month contract traded as high as $2.86/MMBtu November 5. It had slid to $2.33/MMBtu at Monday’s close.

At this time last year, the Henry Hub January contract closed around the $4.50/MMBtu mark. Working gas storage volumes, however, were more than 700 Bcf below both the five-year average and the corresponding week in 2017 at the time.
Source: Platts

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