Natural gas storage inventories decreased 59 Bcf for the week ending November 23, according to the EIA’s weekly report. This week’s draw is below market expectations, which were 68 Bcf. The East and Midwest regions accounted for a majority of the draw, accounting for 46 Bcf of the 59 Bcf.
At the time of writing, the January 2019 contract was trading at $4.516/MMBtu, ~$0.183/MMBtu below the January 2019 close of $4.699/MMBtu yesterday. A majority of this decrease occurred before the storage report release, but declines continued after the release. The December 2018 contract expired yesterday at $4.715/MMBtu.
Working gas storage inventories now sit at 3.054 Tcf, which is 644 Bcf below last year and 720 Bcf below the five-year average.
The December 2018 contract expired yesterday, and traded in a wide range in November, ranging from $3.237/MMBtu to $4.837/MMBtu. The December 2018 contract was very volatile during November, with day-over-day closing changes ranging as high as $0.799/MMBtu and averaging over $0.21/MMBtu for November. This volatility mainly comes from the fundamentals: inventory levels, weather forecasts, supply, and demand. As we continue through the winter season, these fundamentals will play a key role in price levels, and volatility is expected to continue.
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 November 29, 2018.
- Dry gas production increased 0.58 Bcf/d on the week. This increase can mainly be attributed to the Northeast (+0.18 Bcf/d). Smaller increases also came from the Bakken (+0.09 Bcf/d) and the Southwest Mountain region (+0.08 Bcf/d), mainly New Mexico.
- Canadian imports were relatively flat week-over-week.
- Domestic natural gas demand decreased 1.1 Bcf/d week-over-week. Power demand increased 0.20 Bcf/d, but decreases in Res/Com and Industrial demand outpaced the gains in Power, falling 0.85 Bcf/d and 0.45 Bcf/d, respectively.
- LNG exports decreased 0.03 Bcf/d week-over-week, while Mexican exports increased by 0.06 Bcf/d.
Total supply is up 0.58 Bcf/d, and total demand is down 1.00 Bcf/d week-over-week. With the increase in supply and the decrease in demand, expect the EIA to report a weaker draw next week. The ICE Financial Weekly Index report is currently expecting a draw of 60 Bcf for next week. Last year for the same week was an injection of 2 Bcf, while the five-year average is a draw of 66 Bcf.
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