US natural gas storage declines more than forecast as Henry Hub futures surge

The Henry Hub summer strip rose above $5/MMBtu following US natural gas storage fields withdrawing greater volumes than the market expected.

Storage fields withdrew 79 Bcf for the week ended March 11, according to data released by the US Energy Information Administration March 17.

Working gas inventories decreased to 1.440 Tcf. US storage volumes now stand 344 Bcf less than the year-ago level of 1.784 Tcf, and 304 Bcf less than the five-year average of 1.744 Tcf.

The withdrawal outpaced the 70 Bcf draw expected by a survey of analysts by S&P Global Commodity Insights. Responses to the survey were wide, ranging from a 56 Bcf to 90 Bcf withdrawal. It outpaced the five-year average of 65 Bcf and dwarfed the 16 Bcf pull in the corresponding week last year.

The EIA's East and Midwest storage regions led the above-average draw with both declining by 27 Bcf. The South Central region fell by 11 Bcf compared to the five-year average pull of 2 Bcf. The region is now 20% below the five-year average.

The NYMEX Henry Hub April contract rose 19 cents to $4.94/MMBtu following the EIA's storage report release. The summer strip, April through October, rose 16 cents to $5.01/MMBtu. The 2022-23 winter strip, November through March, rose 15 cents to $5.12/MMBtu.

A forecast by S&P Global calls for a 47 Bcf draw for the week ending March 18. This could be the final net draw of the heating season as a 27 Bcf injection is expected for the week ending March 25. Over the past five years, the final draw of the season typically takes place during this week.

US production is forecast to grow by more than 1 Bcf/d during this week to 93.8 Bcf/d. Meanwhile, US demand is slated to decline by 9.5 Bcf/d to 76.2 Bcf/d while exports to Mexico and LNG terminals look to remain flat week over week.

US dry gas production increased by 400 MMcf/d on the day to 93.9 Bcf/d March 17, with most of the growth coming from Texas, according to S&P Global. Canadian imports rose 100 MMcf/d to 4.3 Bcf/d, but LNG imports remained steady at 200 MMcf/d. Total supply came in at 98.4 Bcf/d, up 500 MMcf/d.

On the demand side, power burn and industrial increased by 600 MMcf/d and 200 MMcf/d, respectively. Residential and commercial declined by 400 MMcf/d to 24.6 Bcf/d, with the losses largely attributed to the Midcon market. Exports to Mexico fell by 100 MMcf/d to 5.7 Bcf/d, but LNG exports grew by 300 MMcf/d to 13 Bcf/d. Total demand came in at 91.8 Bcf/d, up 600 MMcf/d on the day, but below the six-day average by 14.7 Bcf/d.