EIA's US gas storage estimate outpaces consensus as NYMEX bears push prices under $3

The US Energy Information Administration on Jan. 26 estimated a 91 Bcf withdrawal from domestic gas storage last week in a report that modestly outpaced market expectations.

The agency's still-largely-bearish report failed to turn back an overnight selloff in NYMEX Henry Hub prompt-month futures, which dropped below $3/MMBtu for the first time since May 2021, data from CME Group and S&P Global Commodity Insights showed.

Last week's inventory drawdown narrowly outpaced analysts' consensus projection for an 84 Bcf withdrawal, expected by S&P Global Commodity Insights' weekly US gas storage survey. EIA's latest estimate, though, was less-than-half the size of the five year-average storage pull of 185 Bcf and only a fraction of the year-ago withdrawal of 217 Bcf, both reported in the corresponding week.

Following a third-consecutive bearish storage report from EIA, US stocks are now building on a surplus. At 2.729 Tcf, inventories are now 128 Bcf, or nearly 5%, above the five-year average and 107 Bcf, or more than 4%, above the year-ago level, agency data shows.

NYMEX

Since mid-December, benchmark US gas futures prices have pulled back by more than 55%, falling from winter highs around $7/MMBtu just six weeks ago. Since late August, prices are down from sustained highs in the $8-$9 range, S&P Global data shows.

This week's push to prices levels below $3 comes as the outlook for US storage this year looks increasingly bearish. Many analysts are now projecting a high-side inventory level near 4 Tcf by early November -- well above the 2022 inventory high at 3.65 Tcf.

Added pressure on the NYMEX also comes as many US oil and gas producers prepare to release their 2023 guidance, highlighting the recent strength in domestic output. After a late December freeze, US production staged a surprisingly rapid recovery into the new year to trend at a record monthly average of 97.9 Bcf/d in January. According to many analysts' projections, US output should continue to grow this year at a modest pace – despite expected inflation in oilfield equipment and services.

Outlook

According to the National Weather Service, nearly all of the continental US faces an outsized risk for below-average temperatures in the six- to 10-day forecast with the exception of a handful of states stretching from Florida to the Carolinas. In a slightly longer-dated forecast, the risk for below-average temperatures is lower, but still includes most of the Midwest and the Northeast – both key regions for US heating demand.

For the week ending Jan. 27, S&P Global's supply-demand and storage models are predicting an inventory drawdown in the range of 140-160 Bcf in what-would-be a relatively bearish late-January withdrawal estimate compared with a five-year average drawdown of 181 Bcf and a year-ago withdrawal of 261 Bcf, data from EIA shows.