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US gas storage inventory drops by 88 Bcf as weaker withdrawal lies ahead

Highlights

Five-year average equals 114 Bcf draw

Forecast shows 52 Bcf pull for week in progress

  • Author
  • Brandon Evans    Eric Brooks    Rachel Wiser
  • Editor
  • Aastha Agnihotri
  • Commodity
  • Natural Gas

US gas inventories fell by 88 Bcf for the first full storage week of December, which equaled the S&P Global Platts' survey expectation, while a draw nearly one-third the five-year average appears likely for the week in progress.

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Storage systems withdrew 88 Bcf for the week ended Dec. 10, according to data released by the US Energy Information Administration on Dec. 16. It equaled the 88 Bcf draw expected by an S&P Global Platts survey of analysts. Over the past five weeks, the survey has missed the EIA estimate by an average of 2 Bcf.

The draw was less than the five-year average of 114 Bcf as well as last year's 118 Bcf pull in the corresponding week. Demand this winter has so far been unremarkable, and the long-expected boost to supplies is materializing as producers ramp up output in the marginal-producing basins. Combined, these have left the market longer on supply than in comparable historical periods, according to Platts Analytics.

Working gas inventories decreased to 3.417 Tcf. US storage volumes now stand 326 Bcf, or 8.7%, less than the year-ago level of 3.743 Tcf and 64 Bcf, or 1.8%, less than the five-year average of 3.481 Tcf.

Platts Analytics' supply and demand model forecasts a 52 Bcf draw for the week in progress, which is roughly one-third of the five-year average pull of 153 Bcf. This would flip the deficit to the five-year average to a surplus as US production strengthens and cold weather has failed to materialize at a nationwide level.

Under normal weather, Platts Analytics expects total US storage inventories to draw down to 1.52 Tcf by the end of March 2022, roughly 100 Bcf above the previous forecast end of winter level. This outlook is based in part on US demand, excluding exports, averaging 101 Bcf/d during the ninety-day peak winter period of December through February.

The NYMEX Henry Hub futures have contracted in response to the loosening of US balances. The January contract was down 3 cents to $3.77/MMBtu on Dec. 16. While this is far below the $6/MMBtu seen in October, it is still more than $1/MMBtu above this time last December.

The persistence of this augmented supply, and the fact it is unwavering even when temperatures are mild and demand is weak, leaves the market with a bearish overhang that will take some serious winter demand to shake loose, according to Platts Analytics.