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US gas inventories drop well below normal as mild winter weather persists

Highlights

55 Bcf drawn from US storage fields in week ended Dec. 17

Triple-digit drawdown likely for week in progress

  • Author
  • Brandon Evans
  • Editor
  • Valarie Jackson
  • Commodity
  • Coal LNG Natural Gas

US natural gas inventories fell about one-third of the five-year average rate, and the remaining Henry Hub winter strip tumbled more than 20 cents.

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Storage fields withdrew 55 Bcf for the week ended Dec. 17, according to data the US Energy Information Administration released Dec. 23. The survey has missed the mark by an average of 2 Bcf over the past six storage weeks.

The withdrawal was slightly below the 57 Bcf draw that an S&P Global Platts survey of analysts expected. The draw was well below the five-year average of 153 and the 147 Bcf pull from the corresponding week of last year.

Working gas inventories decreased to 3.362 Tcf. US storage volumes now stand 234 Bcf, or 6.5%, below the year-ago level of 3.596 Tcf and 34 Bcf, or 1%, above the five-year average of 3.328 Tcf.

The remaining NYMEX Henry Hub winter fell about 23 cents to average $3.63/MMBtu in Dec. 23 trading following the data release. Production has seen strong growth in the fourth quarter, which caused the NYMEX 2022 Henry Hub strip to sell off late in the year to maintain an average below $4/MMBtu.

Platts Analytics' supply and demand model currently forecasts a 128 Bcf draw for the week in progress, which is more than the five-year average pull of 121 Bcf. An early look at the week ending Dec. 31 points to a drawdown of 83 Bcf, which is 15 Bcf below the five-year average, increasing the nascent storage surplus.

Demand looks to grow in multiple sectors in 2022, which should lead to larger year-on-year pulls if normal winter weather arrives with the New Year.

Total US demand is forecast to add another 1.4 Bcf/d in 2022 compared with 2021 to an average of 97.3 Bcf/d, according to Platts Analytics. LNG export demand will be the main driver of the increase as feedgas is forecast to average 12.4Bcf/d in 2022, 1.6 Bcf/d higher than 2021.

Industrial demand is also forecast to rise to an average of 23.3 Bcf/d in 2022, up from 22.6 Bcf/d in 2021. Offsetting some of these increases will be a 1.2 Bcf/d drop in power demand to average 29 Bcf/d in 2022. The higher-priced environment expected in 2022 is likely to keep gas-to-coal switching high, limiting the upside to gas demand for power generation much of the year.