US natural gas storage fields post first triple-digit heating season draw

The first triple-digit natural gas draw of the heating season was larger than the market's expectation, but Henry Hub futures retreated as mild weather for the final week of the year indicated a withdrawal of less than 50 Bcf.

Storage fields withdrew 136 Bcf for the week ended Dec. 24, according to data released by the US Energy Information Administration Dec. 30.

The withdrawal was stronger than the 127 Bcf expected by an S&P Global Platts survey of analysts. The draw was also higher than the five-year average of 121 Bcf, and the 120 Bcf pull in the corresponding week, a year ago.

Working gas inventories decreased to 3.226 Tcf. US storage volumes now stand 250 Bcf, or 7.2%, less than the year-ago level of 3.476 Tcf, and 19 Bcf, or 0.6%, more than the five-year average of 3.207 Tcf.

The remaining NYMEX Henry Hub winter strip, February and March, fell about 28 cents to average at $3.49/MMBtu during trading Dec. 30. The strip was cresting $6/MMBtu as recently as October. A mild winter has allowed stocks in every region, barring the Mountain and the Pacific, to rebound beyond the five-year average, alleviating supply concerns.

Platts Analytics' supply and demand model currently forecasts a 48 Bcf draw for the week in progress, less than half the five-year average of 108 Bcf. The Pacific and the Mountain regions are facing frigid temperatures, even as demand across much of the US dropped steeply.

The Pacific region has been setting new highs with renewable power generation in winter. Renewable generation in California Independent System Operator district is on track to hit new records, as total generation is set for its second-highest December in at least 10 years at 621 GWh/d, roughly 65 GWh/d above 2020. December generation peaked in 2019 at 720 GWh/d. Platts Analytics CAISO generation data goes back to 2010.

Nuclear power gained 27 GWh/d year on year during the month through Dec. 30, as maintenance-related closures had weakened nuclear generation in December 2020. Solar generation in CAISO was at 54 GWh/d in December, a gain of just 1.8 GWh/d but the strongest average for the month in CAISO's history.

Wind generation surged 7.2 GWh/d year on year to its highest December average of 40 GWh/d. Wind and solar generation have both grown between December and January for the past five years, as total CAISO generation fell. Record renewable generation could provide an even stronger downside risk to gas-fired power burn in January, if the trend holds.