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US working natural gas in underground storage drops by 109 Bcf: EIA

Highlights

Pull was larger than analysts expected

Henry Hub futures post modest increase

Denver — US working gas stocks fell by a larger-than-anticipated margin last week, prompting meager gains to Henry Hub following the Thursday morning announcement.

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Storage inventories fell 109 Bcf to 3.039 Tcf for the week ended January 10, the US Energy Information Administration reported Thursday morning.

The pull was more than an S&P Global Platts' survey of analysts that called for a 92 Bcf draw. It even proved to be greater than responses from analysts polled, with the largest estimate expecting a 101 Bcf draw.

The withdrawal was also stronger than the 84 Bcf pull reported during the corresponding week in 2019, but less than the five-year average draw of 194 Bcf, according to EIA data. As a result, stocks were 449 Bcf, or 19.4%, more than the year-ago level of 2.545 Tcf and 149 Bcf, or 5.2%, more than the five-year average of 2.890 Tcf.

The draw was more than double the 44 Bcf pull reported for the week ended January 3.

Total demand was 6.3 Bcf/d higher on average for the reference week as residential-commercial demand, and power burn gained 3.2 Bcf/d and 2 Bcf/d, respectively, according to S&P Global Platts Analytics.

The Northeast saw the largest increase at 3 Bcf/d, although demand there is still lower than normal after nearly a month of significantly warmer-than-normal weather. Another 0.8 Bcf/d of the total US demand growth during the week came from higher exports to Mexico. Upstream, supplies were marginally higher, thanks in no part to production, which fell by 0.8 Bcf/d on the week, mostly a drop in Texas. Canadian imports and LNG sendout helped offset this drop in supplies, leaving total supplies 0.3 Bcf/d higher from the week before.

The NYMEX Henry Hub February contract rose 4 cents to $2.16/MMBtu in the minutes of trading following the larger-than-expected weekly storage report. The February-March strip traded down by nearly 7 cents Wednesday, bringing the contract pair to an average $2.10/MMBtu price.

Expectations for structurally weak gas prices go unchallenged at this point given the massive supply growth the US has seen in the past year. It also leaves open several possibilities for prices to climb in the medium to long term. Further clarity should come as producers release updated guidance in the coming weeks, with many major producers expected to announce far-more conservative upstream development plans than in years past.

A forecast by S&P Global Platts Analytics' supply and demand model calls for a draw of 70 Bcf for the week ending January 17, which would increase the surplus to the five-year average by more than 100 Bcf.

US demand is down by roughly 3 Bcf/d overall, after cooler weather in the Midwest helped offset sizable demand declines in the Northeast and Southeast, according to Platts Analytics. The Northeast alone has seen demand fall by 4.5 Bcf/d week on week, as temperatures there are trending 8 degrees warmer over the same period.

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