Winter not quite done as US gas storage activity flips back to withdrawals

Winter was not quite done as US gas storage volumes flip back to withdrawals following an early injection, according to a survey of analysts by S&P Global Commodity Insights.

The US Energy Information Administration is expected to report a 27 Bcf withdrawal for the week ended April 1. Responses to the survey were wide, ranging from a 16 to 51 Bcf withdrawal. The EIA plans to release its weekly storage report on April 7 at 10:30 am ET.

A 27 Bcf withdrawal from storage during the week ended April 1 would effectively be the inverse of the previous week's 26 Bcf inventory build. It would also contrast the five-year average injection of 8 Bcf and the 19 Bcf addition reported during the corresponding week in 2021.

Inventories would slip to 1.388 Tcf. The deficit to last year would increase to 393 Bcf. The deficit to the five-year average would expand to 279 Bcf.

A widening inventory deficit relative to the five-year average looks to be setting the market up for a bullish injection season ahead, according to S&P Global. End-users hoping to replenish gas stocks for next winter will find themselves competing for supply against an LNG export market and robust gas burns from the power generation sector as gas continues to be economical over coal despite of its elevated costs.

And while the market is likely to see positive inventory accumulations for roughly the next seven months, the East and Midwest regions both look to be getting off to a slow start this injection season. Prolonged cooler weather across the Eastern US has kept demand slightly elevated while production has so-far struggled to return to the highs seen at the end of last year.

The NYMEX Henry Hub May contract rocketed 30 cents to $6.01/MMBtu during trading on April 5. The remaining summer and upcoming winter strip both climbed more than 25 cents to $6.15/MMBtu and $6.20/MMBtu, respectively.

A forecast by S&P Global calls for a 26 Bcf injection for the week ending April 8, which is roughly in line with the five-year average. Warmer weather looks to decrease residential and commercial demand and flip storage activity back to a net injection. Currently, inventories are expected to grow to 3.5 Tcf by the end of October, which would be about 150 Bcf below the five-year average entering the heating season.