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US gas production drop persists, tightening supply and increasing call on storage


Output below 92 Bcf/d, down 4% from December high

US res-comm demand averages 51.8 Bcf/d in January

Above-average storage draws projected into February

  • Author
  • J Robinson
  • Editor
  • Derek Sands
  • Commodity
  • Natural Gas

Following a precipitous drop in US natural gas production earlier this month, output has continued to stumble in late January, tightening the domestic market balance just as colder weather arrives. With gas-fired heating demand hitting seasonal highs recently, increased reliance on gas storage could pose renewed upside risk for 2022 forwards prices.

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After approaching a prior record high at over 96.3 Bcf/d in late December, US gas production has tumbled since the start of the new year, falling by over 4 Bcf/d to average just 92.2 Bcf/d in January.

With output sputtering in the mid-91 Bcf/d range over the past week, US supply has tightened significantly since late December just as temperatures and demand hit levels unseen since last winter, data from S&P Global Platts Analytics shows.

In January, population-weighted temperatures across the US Northeast and Midwest – both key heating-demand regions – have dipped into the teens and even the single-digits Fahrenheit.

US residential-commercial gas demand has spiked in response, averaging about 51.8 Bcf/d month to date – about 6.9 Bcf/d, or more than 15%, higher compared with the year-ago average. Over the next week, heating demand is expected to continue outperforming, averaging nearly 54.9 Bcf/d with the potential for a new winter-season high at over 62 Bcf/d on Jan. 26, forecast data shows.

Tighter supply and strong demand have increased the call on gas storage recently – a trend that appears likely to continue into early February with the potential to significantly reduce inventory levels.


In the two storage reporting weeks ended Jan. 13, the US gas industry pulled an estimated 385 Bcf from inventory, outpacing the prior five-year average drawdown by some 63 Bcf, data from the US Energy Information Administration shows.

Over the coming three reporting weeks, that trend is expected to continue, according to an updated forecast from Platts Analytics. For the reporting weeks ending Jan. 21, Jan. 28 and Feb. 4, currently projected drawdowns of 210 Bcf, 263 Bcf and 198 Bcf, respectively, would outpace the historical average by a collective 210 Bcf in total. If realized, the withdraws would cut stocks to 2.14 Tcf by early February and the leave the US gas market with a 177 Bcf storage deficit.

Even assuming subsequent, average storage drawdowns over the balance of winter, the US gas market would enter the coming injection season with less than 1.5 Tcf in the ground – the lowest winter-ending inventory level since late March 2019, when the US market entered injection season with just 1.1 Tcf.


Since mid-January, 2022 gas forwards and futures prices at the benchmark Henry Hub have actually eased, pulling back from the $4/MMBtu level, despite the bullish weather and storage outlooks.

On Jan. 24, the full 2022 calendar-year curve, excluding the balmo contract, settled at an average $3.98/MMBtu. While the year-ahead curve has strengthened from levels closer to $3.60/MMBtu just one month ago, prices remain well below mid-$4 levels recorded in November, S&P Global Platts most recently published M2Ms forwards data shows.

Assuming a rebound in US gas production is slow to materialize over the coming weeks, continued reliance on gas storage could fuel significantly stronger injection demand this summer, potential keeping gas prices well above $4 through the upcoming cooling season.