Natural gas storage inventories decreased 63 Bcf for the week ending November 30, according to the EIA’s weekly report. This week’s draw is above market expectations, which were 59 Bcf. The East and Midwest regions accounted for a majority of the draw, accounting for 50 Bcf of the 63 Bcf.
At the time of writing, the January 2019 contract was trading at $4.477/MMBtu, ~$0.150/MMBtu above the January 2019 close of $4.327/MMBtu yesterday. A majority of this increase occurred before the storage report release, but gains continued after the release.
Working gas storage inventories now sit at 2.991 Tcf, which is 704 Bcf below last year and 725 Bcf below the five-year average.
The January 2019 contract has traded in a range of $4.327/MMBtu to $4.477/MMBtu in December. This range is more narrow than last month’s range, but the volatility has continued, as expected. As early winter cold has forced draws that now leave inventories below 3.00 Tcf, expect the volatility to continue with fluctuation in the fundamentals.
See the chart below for projections of the end-of-season storage inventories as of November 1, the end of the injection season.
This Week in Fundamentals
The summary below is based on Bloomberg’s flow data and DI analysis for the week ending December 7, 2018.
- Dry gas production decreased 0.22 Bcf/d on the week. The supply decrease can be attributed mainly to the South Central and Gulf regions (-0.26 Bcf/d) and the Mountain region (-0.17 Bcf/d). There was a slight offset to the decrease, with the Northeast gaining 0.20 Bcf/d.
- Canadian imports increased 0.28 Bcf/d week-over-week.
- Domestic natural gas demand increased 4.82 Bcf/d week-over-week. Res/Com demand was the leading contributor to the increase, gaining 3.89 Bcf/d. Power and Industrial demand also increased 0.58 Bcf/d and 0.35 Bcf/d, respectively.
- LNG exports increased 0.03 Bcf/d week-over-week, while Mexican exports decreased by 0.13 Bcf/d.
Total supply is up 0.06 Bcf/d, and total demand is up 4.84 Bcf/d week-over-week. With the increase in demand over the increase in supply, expect the EIA to report a stronger draw next week. The ICE Financial Weekly Index report is currently expecting a draw of 80 Bcf for next week. Last year, the same week was a draw of 69 Bcf, while the five-year average is a draw of 79 Bcf.
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