US natural gas in storage falls less than expected but massive draw looms

Denver — US working natural gas stocks dipped less than the market expected last week, leading to a dip in the Henry Hub prompt month, but a cold spell seizing most of the nation could lead to the largest draw of the heating season thus far for the week in progress.

Storage inventories decreased by 128 Bcf to 2.881 Tcf for the week-ended Jan. 22 the US Energy Information Administration reported Jan. 28. It was a sharp departure from the massive 187 Bcf draw reported the week prior.

US supply and demand balances were much looser than the week prior. The call on storage fields fell by 6.4 Bcf/d week over week, according to S&P Global Platts Analytics. Total demand saw a large decline due to milder temperatures, which pushed residential and commercial and industrial combined demand down nearly 2.9 Bcf/d.

In addition, gas-fired power generation fell by 3.3 Bcf/d. This was due in part to higher wind and coal generation. Gas supply remained relatively stable as 300 MMcf/d of growth in US production was offset by an almost equal decline in net Canadian imports. Colder weather in Canada led to a spike in local demand resulting in less export to the Lower 48.

The withdrawal was weaker than an S&P Global Platts' survey of analysts calling for a 136 Bcf draw. The pull also trailed the 170 Bcf draw reported during the same week last year as well as the five-year average withdrawal of 174 Bcf, according to EIA data.

Storage volumes now stand 78 Bcf, or 3%, more than the year-ago level of 2.803 Tcf and 244 Bcf, or 9%, more than the five-year average of 2.637 Tcf.

The NYMEX Henry Hub March contract slipped 2 cents to $2.68/MMBtu on Jan. 28. Despite the slight dip, the prompt-month contract stands 14 cents higher than one week prior as frigid temperatures have gripped much of the nation during the week in progress, leading to the highest demand of the heating season thus far in multiple storage regions.

Platts Analytics' forecasts a 198 Bcf withdrawal for the week ending Jan. 29 as a cold-weather pattern moves east across the US, dragging down temperatures in the Northeast and Southeast, likely driving demand to a year-to-date high. Average temperatures plummeted Jan. 28 in the Northeast and Southeast cell by 7.5 degrees Fahrenheit and 11.5 degrees, respectively.

It also remains cold across the Midwest, prompting production freeze-offs, particularly in the Bakken Shale. Across the Eastern US, demand has risen by a combined 8 Bcf on the day.