US natural gas heating season arrives later than normal with 25 Bcf pull: survey

US natural gas in storage looks to start the withdrawal season later than normal, but forecasts show the coronavirus pandemic should do little to deter seasonal demand levels moving forward, leaving an upside risk to Henry Hub futures despite elevated inventories.

The heating season could begin with the third-highest annual peak of US natural gas storage ever recorded, according to US Energy Information Administration data. Storage only peaked higher to end the injection season in 2015 and 2016.

The US Energy Information Administration is expected to report a 25 Bcf withdrawal for the week-ended Nov. 20, according to a survey of analysts by S&P Global Platts. Responses to the survey ranged from a 4 Bcf injection to a 39 Bcf withdrawal. The EIA plans to release its weekly storage report on Nov. 25, one day earlier than normal due to the Thanksgiving holiday.

A 25 Bcf pull would be weaker than the 47 Bcf withdrawal reported in the corresponding week last year as well as the five-year average draw of 37 Bcf. A draw within expectations would decrease stocks to 3.933 Tcf. The surplus to the five-year average would grow to 243 Bcf, and the overhang to 2019 would increase to 315 Bcf. The pull would be a flip from the 31 Bcf injection reported for the week prior as colder temperatures heightened US demand.

Temperatures in the East and Midwest tumbled by double digits for the week ended Nov. 20, pushing up residential and commercial demand nearly 10 Bcf/d to the highest levels seen since March, according to S&P Global Platts Analytics. As a result, forecasts for this Wednesday's storage report have flipped back to a net draw approaching the five-year average draw of 37 Bcf.

The tighter demand was partially offset by an immediate response by production, which shot up 2 Bcf/d in the Northeast. The call on storage in the northern US was also dampened by an additional 1.2 Bcf/d of imports from Canada.

The lack of significant heating demand through the first half of November has extended choppy shoulder season fundamentals into the withdrawal season. The Henry Hub calendar 2021 strip began the month above $3.00/MMBtu but fell below $2.60/MMBtu in the last week. While LNG exports continue to set records, holding above 10 Bcf/d for almost a month, prices at Henry Hub are likely to remain depressed until colder weather materializes in early December.

The NYMEX Henry Hub December contract increased 4 cents to $2.75/MMBtu during trading on Nov. 24. The remaining winter strip, January through March, added 5 cents to average $2.83/MMBtu. The prompt month during November 2015 and 2016 averaged $2.28 and $2.87, respectively.

Platts Analytics' supply and demand model expects a 17 Bcf draw for the week ending November 27, which would be 24 Bcf weaker than the five-year average pull.