Draw proves largest of heating season thus far
Henry Hub futures decline despite large pull
Denver — The US Energy Information Administration reported the largest weekly draw from gas in underground storage of the current heating season on Jan. 22, but Henry Hub futures continued to flounder as milder weather points to smaller pulls ahead.
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Register NowStorage inventories decreased 187 Bcf to 3.009 Tcf for the week ended Jan. 15. The report was issued one day later than usual due to federal offices being closed for the US presidential inauguration on Jan. 20.
Lower temperatures propelled residential-commercial and industrial demand nearly 4 Bcf/d higher week over week, according to S&P Global Platts Analytics. In addition, gas-fired power generation demand grew 2.2 Bcf/d, with weakness in wind generation and higher total loads driving thermal generation higher. In addition to stronger demand, total supply fell 900 MMcf/d week on week, with onshore production losses accounting for most of the decline.
The withdrawal was more than the market expected and 10 Bcf stronger than an S&P Global Platts survey of analysts. The pull was much more than the 97 Bcf draw reported during the same week last year as well as the five-year average withdrawal of 167 Bcf, according to EIA data.
Storage volumes now stand 36 Bcf, or 1.2%, more than the year-ago level of 2.973 Tcf, and 198 Bcf, or 7%, more than the five-year average of 2.811 Tcf.
The NYMEX Henry Hub February contract shed 5 cents to $2.44/MMBtu in trading following the release of the weekly storage report. March, the last month of the heating season, also fell 5 cents to $2.45/MMBtu.
Natural gas prices saw some selling pressure during the week in progress, with the February contract falling below $2.50/MMBtu. Losses can be traced to weather models once again backing off on expected cold, which has been a common occurrence this winter. Losses in forward-looking heating-degree days, and thus demand, have resulted in an upward creep in market expectations for end-of-March storage, which are now hovering near 1.65-1.7 Tcf, according to Platts Analytics.
Moreover, with numerous weather forecasts suggesting February could come in significantly milder than normal, the term structure in the market reflects sentiment that winter has been "cancelled," with the balance of winter-to-summer spread nearing 20 cents.
The Platts Analytics supply and demand model currently forecasts a 137 Bcf withdrawal for the week ending Jan. 22, which would grow the surplus versus the five-year average by 37 Bcf. Warmer temperatures in the East and South Central regions chipped away at the recent residential-commercial demand gains.
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January 23, 2021 at 04:43AM
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US working natural gas volumes in underground storage decline 187 Bcf: EIA - S&P Global
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