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US working natural gas in underground storage decreases by 9 Bcf: EIA

Highlights

Storage reaches nearly 800 Bcf above last year

Two more draws likely before injection season

Denver — US working gas in storage fell by a mere 9 Bcf last week, or just 1 Bcf stronger than what was expected from a survey of analysts by S&P Global Platts, as the COVID-19 outbreak looks to lower US-level demand further during the upcoming shoulder season.

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Storage inventories fell by 9 Bcf to 2.034 Tcf for the week ended March 13, the US Energy Information Administration reported Thursday morning.

The pull was slightly more than the survey calling for an 8 Bcf withdrawal. It was much less than the 91 Bcf pull reported during the corresponding week in 2019 as well as the five-year average draw of 63 Bcf, according to EIA data.

Storage volumes now stand 878 Bcf, or 76%, more than the year-ago level of 1.145 Tcf and 281 Bcf, or 16%, more than the five-year average of 1.753 Tcf.

The NYMEX Henry Hub April contract added 2.8 cents to $1.632/MMBtu in trading following the release of the weekly storage report.

With prices cratering in the past week, the incentive to inject gas this summer and withdraw next winter is at its strongest level in months, according to S&P Global Platts Analytics. The summer-winter contract spread for NYMEX Henry Hub gas widened to 55 cents on Wednesday. Both the front and back of the gas curve was lower on oversupply concerns, but the front of the curve has taken the brunt of the decline, leaving open significant buy now, sell later opportunities.

This will likely motivate strong storage injections through the summer, above the supply-and-demand balance implications that necessitate a large amount of gas be injected each day. However, the late-summer period may now look especially bearish should injections early on in the season limit inject-ability further out into the summer.

Platts Analytics' supply and demand model currently expects a 21 Bcf draw for the week ending March 20, which would be about half the five-year average.

US-level demand has edged higher by roughly 4.2 Bcf/d from the week prior, outpacing the roughly 1 Bcf/d increase in US supplies. Demand gains are coming from the Northeast and Midwest as colder temperatures are boosting residential and commercial demand. Down south, warmer weather in Texas and the Southeast is boosting power burn demand.

Upstream, supplies have risen by about 0.9 Bcf/d, the majority of which is being driven by an increase in onshore production receipts, mainly in Texas, up 0.4 Bcf/d, and the Northeast, up 0.2 Bcf/d, week over week.

The first net injection of the year typically occurs during the last week in March or first week in April, according to EIA data.

Platts Analytics estimates a potential US-level demand loss of 3 Bcf/d year over year during the months of April and May spread out among power, residential/commercial and industrial sectors in April and May due to the effects of COVID-19.