US natural gas inventories fell 179 Bcf during the first week of 2022, which was in line with market expectations but well above the average drop, as an even larger draw loomed for the weeks ahead.
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Working gas inventories decreased to 3.016 Tcf for the week ended Jan. 7, according to data released by the US Energy Information Administration on Jan. 13. US storage volumes now stand 199 Bcf, or 6.2%, less than the year-ago level of 3.215 Tcf and 72 Bcf, or 2.4%, more than the five-year average of 2.944 Tcf.
The draw was slightly stronger than the 177 Bcf draw expected by an S&P Global Platts survey of analysts. The drawdown was also more the five-year average of 155 Bcf and last year's 134 Bcf pull in the corresponding week.
The weekly draw represented a tremendous turnaround from the week prior, as the final storage week of 2021 featured a mere 31 Bcf withdrawal. Storage withdrawals have continued rising for the week ending Jan. 14, and early forecasts point to a withdrawal of around 200 Bcf, according to S&P Global Platts Analytics.
US supply and demand balances tightened almost 20 Bcf/d during the first week of January compared with the final week of December 2021, as the first week of 2022 saw not only a significant heightening in demand due to cold weather, but also a measurable drop in production. The geographic dispersion of the production drop raises some questions as to the cause. Stronger withdrawals from storage no doubt had something to do with it, as those high-priority supply volumes effectively displaced wellhead gas flowing on interruptible or otherwise low-priority firm transport contracts, particularly in regions with limited pipe capacity to spare like the Northeast.
Balances have tightened further during the week in progress as cold weather persists across the Eastern US, driving demand gains even amidst a strong recovery in onshore production.
Although the Henry Hub prompt month fell nearly 60 cents to $4.27/MMBtu during trading on Jan. 13, the drop followed substantial gains made on the day prior. Henry Hub forwards rallied Jan. 12 on expectations of sustained cold weather through at least the next two weeks. The February Henry Hub contract rose 61 cents on the day to $4.86/MMBtu.
Month-to-date US demand has climbed to 122 Bcf/d, 14 Bcf/d higher than the five-year average for this time in January. Average population-weighted temperatures in the US have averaged 38 degrees month to date and are expected to stay around that level through Jan. 26, propelling another near 200 Bcf draw for the week ending Jan. 21.