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Colder Weather Forecast Bring Gas Prices Back to $2.90 Levels

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Natural gas storage inventories decreased by 112 Bcf for the week ended Dec. 22, per EIA. The report came in within market expectations but forecasts calling for colder-than-normal temperatures over the next 2-3 weeks have pushed gas prices up $0.30 per MMBtu over the past 2 days. The new prompt month contract, Feb2018, is trading at $2.915 per MMBtu at time of writing.

Working gas storage inventories dropped to 3.332 Tcf, level 62 Bcf below last year and 85 Bcf below the 5-year average.

See chart below for projections of 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 PointLogic’s flow data and DI analysis for the week ending 12/28.

  • Supply: dry gas production is down 166 MMcf/d led by losses in the Rockies region. Freeze offs are believed to be the reason for these declines. Canadian imports are up 350 MMcf/d.
  • Demand: as freezing temperatures returned, demand for natural gas increased sharply week-on-week across all sectors. Res/com is up 17.4 Bcf/d, power increased by 1.0 Bcf/d. LNG exports are also up 380 MMcf/d and back to 3.2 Bcf/d export levels. Mexican exports decreased by 110 MMcf/d.
  • Total supply is up 0.35 Bcf/d to 83.2 Bcf/d while total demand is up 22.6 Bcf/d to 117.8 Bcf/d. The first 200+Bcf withdrawal is expected to be reported in next week’s EIA report.
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