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US working natural gas in storage likely fell 126 Bcf last week: survey

Highlights

Surplus likely to rise over next few weeks

Henry Hub March contract remains below $1.90

Denver — US natural gas stocks are expected to have fallen by 126 Bcf last week, according to a survey of analysts, increasing the storage surplus to the five-year average, with about two months remaining in the heating season before the transition to net injections.

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The US Energy Information Administration is expected to report the 126 Bcf withdrawal for the week ended January 31, according to a survey of analysts by S&P Global Platts. Responses to the survey ranged from a draw of 110 Bcf to 136 Bcf. The EIA plans to release its weekly storage report on Thursday at 10:30 am EDT.

A 126 Bcf withdrawal would be less than the 228 Bcf pulled in the corresponding week last year as well as the five-year average draw of 143 Bcf. A pull within expectations would decrease stocks to 2.62 Tcf. The surplus to the five-year average would expand to 210 Bcf, and storage would be 626 Bcf above where it was at this time in 2019.

The draw will likely be much less than the 201 Bcf reported for the week ended January 24. That week's brief cold spell brought the first bullish storage report of the year, but US-level temperatures climbed 6 degrees week over week, reducing the pull on inventories. Residential and commercial demand for the week ended January 31 declined by 10.6 Bcf/d, according to data compiled by S&P Global Platts Analytics.

The cold snap nudged the Lower 48's call on storage above 200 Bcf, but warmer temperatures for the final week of January have dropped forecasts back below the five-year average. The only demand segment that increased for the week ended January 31 was LNG exports, which set a new record of 9.17 Bcf/d, according to Platts Analytics.

However, LNG feedgas deliveries are not likely to hold at these levels through the spring, with bearish conditions likely persisting for the US gas market at least until gas-fired power generation kicks in this summer.

The warmer-than-normal winter has dramatically weakened residential and commercial demand year over year. Winter-to-date residential and commercial demand has averaged 38.9 Bcf/d, a decline of 3.7 Bcf/d winter over winter, according to Platts Analytics. This accounts for a total loss of 353 Bcf in US residential and commercial demand since November 1 compared to last winter.

The NYMEX Henry Hub March contract added 5.6 cents during Tuesday afternoon trading but remained well below the $2 mark at $1.875/MMBtu. Prices for the upcoming shoulder season months of April and May were at $1.90 and $1.95, respectively.

Platts Analytics' supply and demand model currently expects an 88 Bcf draw for the week ending February 7, which is 43 Bcf below the five-year average. The following week also shows a potential draw of less than 100 Bcf.