US natural gas inventories draw forecast to double last year's rate: survey

Analysts expect another sizable draw from US natural gas stocks as the summer injection season appears poised to begin approximately 300 Bcf below the five-year average.

The US Energy Information Administration is expected to report a 120 Bcf withdrawal for the week-ended March 4, according to a survey of analysts by S&P Global Commodity Insights. Responses to the survey ranged from a 110 to 126 Bcf withdrawal. The EIA plans to release its weekly storage report on March 10.

A 120 Bcf withdrawal would be more than the five-year average draw of 89 Bcf and more than double the 59 Bcf pull reported during the corresponding week in 2021. It would reduce stocks to 1.523 Tcf. The deficit to last year would increase to 277 Bcf. The deficit to the five-year average would climb to 286 Bcf.

The draw should prove less though than the week prior's 139 Bcf pull.

The NYMEX Henry Hub April contract shed 23 cents to $4.60/MMBtu during trading on March 8.

The trend of larger-than-normal storage withdrawals has become a defining characteristic of the US natural gas market this year to date. The tangible effects of this trend are inventories going from a 72 Bcf surplus in the first week of 2022 to a nearly 300 Bcf deficit by the end of February. This also positions current inventories roughly 280 Bcf lower than year-ago levels, which is especially noteworthy given the effects of the Deep Freeze winter event in February last year which drove near-record withdrawals from gas stocks.

If storage withdrawals continue through the end of March at the five-year average rate stocks would end the Winter 2021-22 heating season at approximately 1.37 Tcf. Compare this with the five-year average season-ending inventory of 1.659 Tcf, or the Winter 2020-21 season-ending inventory of 1.755 Tcf, and it's clear stocks this year are well below normal, paving the way for a likely continuation of the bullish market sentiment that won't seem to go away, according to S&P Global.

A forecast by S&P Global Commodity Insights calls for a 45 Bcf draw for the week ending March 11, which would be less than five-year average pull by 20 Bcf. The final net withdrawal from US inventories typically occurs for the week ending March 25.

US storage forecast for the end of March was lowered 200 Bcf from last month's forecast to 1.46 Tcf following multiple 200-plus Bcf withdrawals, according to S&P Global. The resumed uptrend in US production will allow inventories to inject at a stronger pace this summer, building to an expected 3.65 Tcf by the end of October, 100 Bcf lower than the previous forecast but in-line with five-year averages.

US production is forecast to rebound to 95 Bcf/d in March with the balance of 2022 averaging 96.1 Bcf/d following low January and February levels where well freeze-offs dropped output to average below 93 Bcf/d.

Total US demand remained strong in February as cold weather lingered and LNG exports reached record single-day records above 13.3 Bcf/d. Driven by LNG exports as well a strong power demand on the back of lower coal generation, US demand is forecast to average 102 Bcf/d for 2022, 4 Bcf/d stronger than 2021 averages.