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US working natural gas volumes in underground storage fall 91 Bcf: EIA

Highlights

Survey expected 78 Bcf withdrawal

Henry Hub winter futures leap on large pull

  • Author
  • Brandon Evans    Kent Berthoud
  • Editor
  • Gary Gentile
  • Commodity
  • Electric Power Natural Gas

Denver — US natural gas storage volumes fell at a higher rate for the week ended Dec. 4 than most of the market expected, while the remaining Henry Hub winter strip and the summer strip both jumped by an average of 10 cents following the weekly estimate.

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Storage inventories decreased by 91 Bcf to 3.848 Tcf the US Energy Information Administration reported Dec. 10.

The withdrawal was much higher than an S&P Global Platts survey of analysts calling for a 78 Bcf pull. Responses to the survey ranged from a 65 to a 95 Bcf withdrawal. This was also stronger than the 57 Bcf draw reported during the same week last year as well as the five-year average withdrawal of 61 Bcf, according to EIA data.

Storage volumes now stand 309 Bcf, or 8.7%, more than the 3.539 Tcf a year earlier and 260 Bcf, or 7.2%, above five-year average of 3.588 Tcf.

The NYMEX Henry Hub January contract jumped 12 cents to $2.57/MMBtu in trading following the release of the weekly storage report at 10:30 am ET. The remaining winter strip, February and March, added 11 cents to average $2.68/MMBtu, an increase of 15 cents from one a week earlier, but still well below the $3/MMBtu averaged during most of October.

Natural gas prices remained soft entering into the EIA report, with the prompt-month January contract remaining below $2.50/MMBtu. Moreover, the winter premium has been completely removed from the NYMEX curve, as the March/April spread went negative this week. This is the earliest this spread has turned negative since the 2015 heating season.

Bullish sentiment has eroded for more than a month now as very mild temperatures in November and a string of bearish EIA storage surprises dramatically reduced end-March stockout concerns. After the EIA report, natural gas prices jumped, with the January contract up roughly 12 cents day on day near $2.56/MMBtu. The rally was not just confined to the prompt contract. Summer 2021 prices also jumped between 10-12 cents/MMBtu following the report.

The week in progress has tightened as colder temperatures boosted residential and commercial demand by nearly 4 Bcf/d on the week, according to S&P Global Platts Analytics. Moreover, increased electric space heating loads and lower wind output caused thermal loads to increase on the week, propelling gas-fired power generation 1.5 Bcf/d higher.

Stronger US demand was met with production shifting 800 MMcf/d lower on the week. Lower production was met with a 700 MMcf/d rise in net Canadian imports. Platts Analytics' supply and demand model currently forecasts a 125 Bcf withdrawal for the week ending Dec. 11, which would shrink the surplus versus the five-year average by an additional 20 Bcf as cooler temperatures spike US-level demand week over week.