Colder Weather Forecast Bring Gas Prices Back to $2.90 Levels

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.

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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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Maria Sanchez

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