[contextly_auto_sidebar]
Natural gas storage inventories decreased 48 Bcf for the week ending March 6, according to the EIA’s weekly report. This was below the expected draw of 56 Bcf.
Working gas storage inventories now sit at 2.043 Tcf, which is 796 Bcf above inventories from the same time last year and 227 Bcf above the five-year average.
Prior to the storage report release, the April 2020 contract was trading at $1.802/MMBtu, roughly $0.076 below yesterday’s close. After the release of the report and at the time of writing, the April 2020 contract was trading at $1.814/MMBtu.
At the expense of the crude market, gas found some traction this week. After trading as low as $1.61 on Monday, prices rallied this week up to nearly $2/MMBtu on news that Saudi Arabia released the floodgates on crude production and dropped their crude prices. This happened after Russia did not agree to the OPEC+ production cut plan. After Saudi Arabia dropped prices and increased production, WTI dropped significantly and has traded between $30/Bbl and $35/Bbl this week. E&Ps are reporting new activity plans in light of the depressed crude prices, outlining decreased CAPEX as well as decreased activity. This change to the crude market brought some bullish sentiment to the natural gas market with the anticipation of decreases in natural gas production to help balance the oversupplied market. However, prices weren’t able to hold near the $2/MMBtu area and have dropped below $1.80/MMBtu early this morning.
See the chart below for projections of the end-of-season storage inventories as of April 1, the end of the withdrawal season.
This Week in Fundamentals
The summary below is based on Bloomberg’s flow data and Enverus analysis for the week ending March 12.
Supply:
- Dry production decreased 0.43 Bcf/d on the week. Most of the decrease came from the East (-0.27 Bcf/d) and the South Central region (-0.19 Bcf/d). The Pacific also saw a small decrease (-0.01 Bcf/d), while the Mountain region saw an increase (+0.05 Bcf/d). The Midwest saw no change week over week.
- Canadian net imports decreased 0.69 Bcf/d, mainly due to decreased imports into the Northeast and increased exports in the Midwest.
Demand:
- Domestic natural gas demand decreased 7.36 Bcf/d week over week. Res/Com demand accounted for the majority of the decrease, falling 6.01 Bcf/d on the week. Industrial demand and Power demand also decreased, falling 0.73 Bcf/d and 0.62 Bcf/d, respectively.
- LNG exports increased 0.15 Bcf/d, while Mexican exports decreased 0.03 Bcf/d.
Total supply decreased 1.12 Bcf/d, while total demand decreased 7.50 Bcf/d week over week. With the decrease in demand outpacing the decrease in supply, expect the EIA to report a weaker draw next week. The ICE Financial Weekly Index report is currently expecting a draw of 20 Bcf. Last year, the same week saw a draw of 47 Bcf; the five-year average is a draw of 51 Bcf.
