US working natural gas volumes in underground storage fall 1 Bcf: EIA

Denver — US natural gas in storage fell only 1 Bcf during the week that featured the Thanksgiving holiday in the US, drawing down Henry Hub futures further, but withdrawals should return to more normal levels in the weeks ahead on the back of cooler weather.

Storage inventories dipped to 3.939 Tcf for the week ended Nov. 27, the US Energy Information Administration reported the morning of Dec. 3.

The withdrawal was less than an S&P Global Platts' survey of analysts calling for a 13 Bcf pull. Responses to the survey ranged from a 4 Bcf injection to a 23 Bcf withdrawal. The build was also well below the 21 Bcf draw reported during the same week a year ago as well as the five-year average withdrawal of 41 Bcf, according to EIA data.

Mild temperatures interacted with the demand-draining Thanksgiving holiday weekend. As a result, total demand dropped 1.4 Bcf/d week on week, with residential-commercial making up most of that decline, according to Platts Analytics. Total supply did not follow demand lower, increasing the implied looseness observed in the EIA report. Domestic production rose 1.1 Bcf/d, led by the Northeast, Southeast, and Texas.

Storage volumes now stand 343 Bcf, or 11.5%, above the year-ago level of 3.596 Tcf and 290 Bcf, or 8%, above the five-year average of 3.649 Tcf.

Gas prices tumbled this week, with the prompt-month January contract leading the dive. Entering the report, the January contract was off more than 8% day on day — down to a multi-month low near $2.54/MMBtu and marking a near $1.00/MMBtu contraction in price over the past month as very mild temperatures in November and concerns over the weather in December have sparked a massive liquidation in speculative length, according to Platts Analytics.

After the report was issued at 10:30 am ET, prices pared some of the declines, rising near $2.57/MMBtu as some market participants feared an injection would be reported. Nevertheless, with the January contract now trading at a discount to the February contract and peak summer months, the winter premium has now completely vanished.

Platts Analytics' supply and demand model currently forecasts an 85 Bcf withdrawal for the week ending Dec. 4, which would shrink the surplus versus the five-year average by 24 Bcf as cooler weather spikes US-level demand week on week. Colder weather and a return from the Thanksgiving holiday pushed demand up 9 Bcf/d on the week. The following week's draw should near triple digits if weather forecasts hold true.