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Survey calls for second-ever US natural gas storage draw above 300 Bcf

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Survey calls for second-ever US natural gas storage draw above 300 Bcf

Highlights

Surplus to five-year average will switch to deficit

Prices retreat following polar vortex

New York — US natural gas stocks posted a massive draw last week, likely well north of 300 Bcf, as the end-of-season storage outlook has changed dramatically in only two weeks.

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The US Energy Information Administration is expected to report a 333 Bcf withdrawal for the week-ended Feb. 19, according to a survey of analysts by S&P Global Platts. It would register as the second-largest storage draw on record, and only the second weekly pull to ever register above 300 Bcf.

Significantly colder-than-normal temperatures across the middle of the country led to record production losses, sizeable demand curtailments and extremely elevated cash prices. Such swings in daily supply and demand adds a bit of uncertainty in forecasting this week's EIA report as analysts' predictions for the size of the draw varied by nearly 100 Bcf. Responses to the survey ranged from a 287 to a 360 Bcf withdrawal.

US gas production fell 9 Bcf/d versus the prior week, according to data by S&P Global Platts Analytics. Most of the losses were observed within Texas, Oklahoma and the Southeast. Such large losses in US production led to an aggregate increase of 2.6 Bcf/d in net Canadian imports and LNG sendouts week-over-week.

Lower production, massive gains in spot natural gas prices, loss of power and port closures led to LNG feedgas and exports to Mexico falling by 5.1 and 1.3 Bcf/d, respectively, week over week.

Industrial demand was also impacted by the freezing temperatures, with numerous refineries and petrochemical plants announcing closures or reduced run rates during the week.

Despite the pair of gigantic weekly draws following the polar vortex, cash and futures gas prices have crashed back to Earth, with the NYMEX Henry Hub summer strip back below $3/MMBtu.

The NYMEX Henry Hub March contract fell 7 cents to $2.88/MMBtu during trading on Tuesday, a decrease of more than 20 cents from the week prior.

A 333 Bcf draw would be much stronger than the 145-Bcf withdrawal reported in the corresponding week last year as well as the five-year average draw of 120 Bcf. A withdrawal within expectations would decrease stocks to 1.948 Tcf. The surplus to the five-year average would flip to a 156 Bcf deficit, and the deficit to 2020 would expand to 293 Bcf.

Platts Analytics' supply and demand model expects a 150-Bcf draw for the week ending February 26, which would still nearly double the five-year average despite a drastic week-over-week drip.

The largest weekly storage decline on record stands at 359 Bcf, which was set for the week ended Jan. 5, 2018. During that week, a "bomb cyclone" blasted its way across the US, prompting freeze-offs and pipeline-related outages in nearly all US basins, dropping supply by 3 Bcf/d.

The EIA plans to release its weekly storage report on Feb. 25 at 10:30 am ET.