US natural gas storage reverses flow as final draw drops stocks below 1.4 Tcf

US natural gas storage flipped back to withdrawal mode in the week ended April 1, widening the deficit and delaying the start to injection season as Henry Hub futures held firmly at over $6/MMBtu.

Lingering winter weather in late March prompted a surprisingly large drawdown of 33 Bcf in the week ended April 1, according to the US Energy Information Administration's April 7 report.

The withdrawal was larger than the 27 Bcf pull expected from this week's survey of analysts by S&P Global Commodity Insights. The drawdown also stood in stark contrast to the five-year historical record which has averaged an 8 Bcf injection for the week ended April 1.

Working gas inventories pulled back 1.382 Tcf during the week, setting a new season-ending low for US storage this year, EIA data showed. As of April 1, inventories stood 399 Bcf, or more than 22%, below the year-ago level of 1.781 Tcf and 285 Bcf, or about 17%, behind the five-year average level at 1.667 Tcf.

The NYMEX Henry Hub May contract gained as much as 40 cents in April 7 trading before easing back from its session high to settle at $6.36/MMBtu, S&P Global data showed.

The late season drawdown from gas storage underscores the impact of chilly weather this spring which has propped up heating demand and further tightened the US supply balance, raising concern in the gas futures and forwards markets.

Weather, supply

Over the next 14 days, abnormally cool temperatures are expected to dominate across the US West and the Midcontinent, according to a pair of short-term forecasts published by the US National Weather Service April 7. Cooler temperatures could extend the heating through mid-April – potentially leaving intact, or further expanding, the US storage deficit.

For the week currently in progress, S&P Global analysts are now expecting a 28 Bcf injection, followed by another paltry 35 Bcf injection in the week ending April 14. Assuming those predictions are accurate, the US storage deficit would widen by 3 Bcf to an estimated 288 Bcf below average by mid-April

As US inventories languish, production is now increasingly central to the US supply-demand story.

Over the past month, US gas production has stumbled its way into the second quarter averaging just 93.7 Bcf/d, S&P Global Commodity Insights data shows. After trending at a record-high 95.7 Bcf/d in December, domestic output faced a setback this winter exacerbated by a series of freeze-offs across Texas and the US Midcontinent. While rig numbers, new well drilling and well completions have continued to grow in the major US shale basins this year, production has yet to regain earlier momentum seen in fourth-quarter 2021.