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Gas Storage Draw in Line with Expectations, Prices Continue Trading in the $2.60’s

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Natural gas storage inventories decreased by 78 Bcf for the week ending Feb. 23, according to the EIA’s weekly report. The draw was in line with market expectations, and natural gas futures are unchanged following the report. Prompt month contract, April ’18, is trading at $2.67 per MMBtu at the time of writing.

Today’s storage withdrawal compares with the 107 Bcf draw on the 5-year average and the 7 Bcf build reported last year.

Working gas storage inventories dropped to 1.682 Tcf, level 680 Bcf below last year and 372 Bcf below the 5-year average. Despite the lower-than-average inventory levels, natural gas prices continue to trade in the $2.60s due to the strong supply picture. Starting in the 4Q2017, pipeline takeaway capacity additions allowed significant gains in the Marcellus/Utica, pushing total U.S. dry gas production levels to 78 Bcf/d. Even though the demand sectors have seen gains from power, industrial, LNG and even a cold winter, production growth continues to outpace demand gains.

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 PointLogic’s flow data and DI analysis for the week ending Feb. 28, 2018.

  • Supply:
    • Dry gas production remains at a strong 78 Bcf/d this week, gaining a 470 MMcf/d lead by increases in Northeast (+0.2 Bcf/d) and Gulf of Mexico (+0.2 Bcf/d).
    • Canadian imports were flat week-on-week..
  • Demand:  Demand saw a 3rd consecutive week-on-week decrease due to mild temperatures.
    • Domestic natural gas demand is down 4.5 Bcf/d, with ResCom (-3.2 Bcf/d), power (-0.9) and industrial (-0.4 Bcf/d).
    • LNG and Mexico exports were up week-on-week, 1.0 Bcf/d and 0.1 Bcf/d respectively.
  • Total supply is up 0.65 Bcf/d while total demand is down 3.7 Bcf/d. A lower withdrawal is expected again next week, as storage will start its transition from withdrawal to injection season in the coming weeks..
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