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US working natural gas in underground storage decreases by 201 Bcf: EIA

Highlights

Largest pull since week ended Dec. 20

Futures weaken due to lower demand ahead

New York — US natural gas working stocks fell by 201 Bcf last week, which marked the first above-average pull of 2020, but futures continued to decline as the heating-demand spike subsided.

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Storage inventories fell to 2.746 Tcf for the week ended January 24, the US Energy Information Administration reported Thursday morning.

The pull was less than an S&P Global Platts' survey of analysts calling for a 207 Bcf draw.

The withdrawal was more than the 171 Bcf pull reported during the corresponding week in 2019 as well as the five-year average draw of 143 Bcf, according to EIA data. Stocks were 524 Bcf, or 23.6%, more than the year-ago level of 2.222 Tcf and 193 Bcf, or 7.6%, more than the five-year average of 2.553 Tcf.

Cold weather moved across the central and eastern US for the week ended January 24, driving residential and commercial demand to the highest weekly average so far of the winter season, according to S&P Global Platts Analytics. Total demand increased by 17.6 Bcf/d to an average of 124.1 Bcf/d as the Northeast region contributed more than half of the gains.

Temperatures in both the Northeast and the Southeast fell by 17 degrees from the average a week earlier, boosting total demand nearly 50% week over week to nearly 32 Bcf/d overall, up from 21.7 Bcf/d.

Even with demand hitting its highest level of the season last week, the weakening of prices at NYMEX has continued unabated. Both the February and March contracts have traded in the sub-$2/MMBtu range since January 17, and look to be testing new lows as the February contract settled Wednesday at $1.88/MMBtu, only 1 cent higher than where March, now the prompt month, opened Thursday.

A slightly smaller-than-expected withdrawal pushed March lower by 3 cents to $1.84/MMBtu following the EIA announcement Thursday morning. This also deepens the backwardation in the curve, putting March NYMEX at a more than 10-cent discount to May, for example, with each month sequentially valued higher all the way through August.

WEEK IN PROGRESS

A forecast by S&P Global Platts Analytics' supply and demand model calls for a much lesser draw of 115 Bcf for the week ending January 31, which would add to the surplus.

Total demand is 12 Bcf/d lower week over week to average 112.1 Bcf/d, as temperatures warmed in the Midwest and Northeast US, driving declines in residential and commercial demand. However, LNG feedgas demand continues to inch higher, reaching an average of nearly 9.2 Bcf/d in spite of weak netbacks worldwide for US LNG exports.

Upstream, US supplies are down by 1.4 Bcf/d, due to a large decline in LNG sendout, down 1 Bcf/d, and a smaller drop in net Canadian imports, down 0.3 Bcf/d. Both are mainly due to the warmer weather across the eastern half of the US.

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