US natural gas inventories tumbled well above average levels once again as the heating season enters its final weeks before summer injections begin.
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Working gas inventories decreased to 1.519 Tcf. US storage volumes now stand 281 Bcf, or 15.6%, less than the year-ago level of 1.8 Tcf and 290 Bcf, or 16%, less than the five-year average of 1.809 Tcf.
The withdrawal was more than the 120 Bcf draw expected by an S&P Global Commodity Insights' survey of analysts. It also outpaced the five-year average withdrawal of 89 Bcf and more than doubled last year's 59 Bcf pull in the corresponding week.
The Midwest region accounted for 40 Bcf of the weekly pulled, as it is now the most undersupplied of all five EIA storage regions relative to the five-year average. Despite the shortage, the Midwest is expected to receive higher imports from Canada this summer, which should allow it to inject plenty of gas this summer.
S&P Global Commodity Insights expects imports into the Midwest will be strong at 3.9 Bcf/d this summer. Western Canada storage inventories sit at 210 Bcf, which is 50 Bcf below the five-year low for this time. However, strong production is expected to drive constraints on NGTL pipeline this summer, and limit injections.
Even during periods when there are no constraints, the AECO winter 22-23 strip is likely too weak to incentivize strong injections. Technically, the spread between AECO's summer 22 and winter 22-23 strip is 37 cents/MMBtu, which should be enough to rapidly fill storage. However, AECO's summer 22 strip is trading 90 cents to $1 behind Chicago, implying the market expects constraints on the NGTL system.
The NYMEX Henry Hub April contract added 10 cents to $4.63/MMBtu on March 10, down 7 cents from one week prior. The summer strip, April through October, climbed 11 cents to average $4.73/MMBtu, down 4 cents week over week.
A forecast by S&P Global calls for a 49 Bcf draw for the week ending March 11, which would measure 16 Bcf less than the average draw. The week after points to a drawdown in line with the average. The last net withdrawal of the season typically occurs for the week ending March 25.
US storage forecast for the end of March was lowered 200 Bcf from last month's forecast to 1.46 Tcf following multiple 200-plus Bcf withdrawals in 2022, according to S&P Global. The resumed uptrend in US production will allow inventories to inject at a stronger pace this summer, building to an expected 3.65 Tcf, 100 Bcf lower than the previous forecast but in-line with five-year averages.
US production is forecast to rebound to 95 Bcf/d in March with the balance of 2022 averaging 96.1 Bcf/d following low January and February levels where well freeze-offs dropped output to average below 93 Bcf/d.