US working natural gas volumes in underground storage fall 91 Bcf: EIA

US natural gas storage volumes fell at a higher rate for the week ended Dec. 4 than most of the market expected, while the remaining Henry Hub winter strip and the summer strip both jumped by an average of 10 cents following the weekly estimate.

Storage inventories decreased by 91 Bcf to 3.848 Tcf the US Energy Information Administration reported Dec. 10.

The withdrawal was much higher than an S&P Global Platts survey of analysts calling for a 78 Bcf pull. Responses to the survey ranged from a 65 to a 95 Bcf withdrawal. This was also stronger than the 57 Bcf draw reported during the same week last year as well as the five-year average withdrawal of 61 Bcf, according to EIA data.

Storage volumes now stand 309 Bcf, or 8.7%, more than the 3.539 Tcf a year earlier and 260 Bcf, or 7.2%, above five-year average of 3.588 Tcf.

The NYMEX Henry Hub January contract jumped 12 cents to $2.57/MMBtu in trading following the release of the weekly storage report at 10:30 am ET. The remaining winter strip, February and March, added 11 cents to average $2.68/MMBtu, an increase of 15 cents from one a week earlier, but still well below the $3/MMBtu averaged during most of October.

Natural gas prices remained soft entering into the EIA report, with the prompt-month January contract remaining below $2.50/MMBtu. Moreover, the winter premium has been completely removed from the NYMEX curve, as the March/April spread went negative this week. This is the earliest this spread has turned negative since the 2015 heating season.

Bullish sentiment has eroded for more than a month now as very mild temperatures in November and a string of bearish EIA storage surprises dramatically reduced end-March stockout concerns. After the EIA report, natural gas prices jumped, with the January contract up roughly 12 cents day on day near $2.56/MMBtu. The rally was not just confined to the prompt contract. Summer 2021 prices also jumped between 10-12 cents/MMBtu following the report.

The week in progress has tightened as colder temperatures boosted residential and commercial demand by nearly 4 Bcf/d on the week, according to S&P Global Platts Analytics. Moreover, increased electric space heating loads and lower wind output caused thermal loads to increase on the week, propelling gas-fired power generation 1.5 Bcf/d higher.

Stronger US demand was met with production shifting 800 MMcf/d lower on the week. Lower production was met with a 700 MMcf/d rise in net Canadian imports. Platts Analytics’ supply and demand model currently forecasts a 125 Bcf withdrawal for the week ending Dec. 11, which would shrink the surplus versus the five-year average by an additional 20 Bcf as cooler temperatures spike US-level demand week over week.
Source: Platts