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US working natural gas volumes in underground storage rise by 29 Bcf: EIA

Highlights

Build comes in well below expectations

Net withdrawal projected for week in progress

Denver — US natural gas storage volumes expanded well below market expectations last week, while a net withdrawal is anticipated for the week in progress, kicking off the heating season two weeks earlier than last year.

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Storage inventories increased by 29 Bcf to 3.955 Tcf for the week ended Oct. 23, the US Energy Information Administration reported the morning of Oct. 29.

The injection was less than an S&P Global Platts' survey of analysts calling for a 37 Bcf build. Responses to the survey ranged from an injection of 32 Bcf to 53 Bcf. The injection measured much less than the 89 Bcf build reported during the same week last year as well as the five-year average gain of 67 Bcf, according to EIA data.

Storage volumes now stand 285 Bcf, or 8%, more than the year-ago level of 3.670 Tcf and 289 Bcf, or 8%, more than the five-year average of 3.666 Tcf.

The NYMEX Henry Hub December contract shed 7 cents to $3.21/MMBtu in trading following the release of the weekly storage report at 10:30 am ET. However, those declines shifted during the afternoon, with the prompt month back to $3.29/MMBtu.

S&P Global Platts Analytics' supply and demand model currently forecasts a 29 Bcf withdrawal for the week ending Oct. 30. The net withdrawal looks to occur two weeks earlier than the first draw last year as the surplus to the five-year average would shrink by a sizable 81 Bcf. The first pull of the year typically occurs during the first full week of November, according to EIA historical data.

Hurricane Zeta smashed into Louisiana on Oct. 28, making it the fifth storm to strike the state this year. It crippled offshore production in the Gulf of Mexico. Offshore output declined from 2.2 Bcf/d on Oct. 22 to 1 Bcf/d by Oct. 27 in anticipation of the storm. It fell to 294 MMcf/d in the storm's wake on Oct. 29.

Zeta is weaker than the three major hurricanes that have pummeled the US Gulf Coast over the last two months during this historic season. Based on the initial offshore declines, the storm is likely to have a primarily bullish effect on prices at Henry Hub, according to Platts Analytics.

Zeta set a record as the 11th named storm to make landfall in the Lower 48 in a single season. It is also the 27th named storm of the year, already tying the record-setting 2005, but with a full month remaining in the hurricane season.

The sudden supply losses come just as the US begins to see the first signs of winter demand, easing the massive supply overhang that has built up through most of the summer. Colder weather across much of the country has increased residential and commercial demand by 7.4 Bcf/d for the week in progress.