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Massive US natural gas storage draws look to continue in 2022 as winter deepens

Highlights

Survey calls for 193 Bcf withdrawal

Henry Hub futures edge higher

  • Author
  • Brandon Evans    Felix Clevenger
  • Editor
  • Richard Rubin
  • Commodity
  • Natural Gas

US natural gas inventories continue to fall at an above-average pace as sinking supplies signal potentially tighter markets in the weeks ahead and greater reliance falls on storage withdrawals and Canadian imports, supporting strong prices during the second half of January.

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The US Energy Information Administration is expected to report a 193 Bcf withdrawal for the week ended Jan. 14, according to a survey of analysts by S&P Global Platts. Responses to the survey were tight, ranging from a 185 Bcf to 200 Bcf withdrawal. The EIA plans to release its weekly storage report on Jan. 20 at 10:30 am ET.

A 193 Bcf withdrawal would be more than the five-year average draw of 167 Bcf and the 179 Bcf pull reported during the corresponding week in 2021. It would reduce stocks to 2.823 Tcf. The deficit to last year would expand to 213 Bcf. The surplus to the five-year average would contract to 46 Bcf.

The EIA reported a 179 Bcf pull for the first full week of 2022, which was 2 Bcf more than the Platts' survey expected. So far 2022 has represented a complete turnaround from December, which featured a string on below-average storage withdrawals.

The NYMEX Henry Hub February contract added 6 cents to $4.32/MMBtu during the trade day on Jan. 18 as US supply and demand fundamentals tighten further.

A forecast by S&P Global Platts Analytics calls for an even larger draw of 194 Bcf for the week ending Jan. 21 with a 200 Bcf-plus pull likely for the last full storage week of the month.

Total US demand has fallen by more than 10 Bcf/d over the past four days, but colder weather in the near-term forecast looks poised to keep demand elevated in the week ahead, according to Platts Analytics. It is expected to push from current levels of 122 Bcf/d to an average of 133 Bcf/d through Jan. 25. Meanwhile, US supplies have been slowly declining over the last week, with production volumes sinking by roughly 1.2 Bcf/d from 93 Bcf/d to 91.8 Bcf/d as of Jan. 18.

US Upper Midwest demand is slated to spike this week as temperatures drop and continued cold in the Northeast could constrain incoming supply from the Appalachian Basin. Midwest demand is forecast to average 24.5 Bcf/d, up 4.8 Bcf/d from this week as temperatures average 6 degrees lower week on week. Similarly, the Northeast is expected to see a continued cold spell and add another 1 Bcf/d of demand on average, which could keep more of its production in the region.

This appears to signal tighter markets in the week ahead as more reliance falls on storage withdrawals and Canadian imports to keep the market in balance, according to Platts Analytics. This may be supportive of spot prices at Henry Hub and likely extend out to regional basis hubs through the second half of January.