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Storage Deficit Dwindling as Temperatures Remain Above Average


Natural gas storage inventories decreased 20 Bcf for the week ending December 28, according to the EIA’s weekly report. This week’s draw was significantly below market expectations, which were 33 Bcf. The Midwest and the East led the draws, with 20 Bcf and 15 Bcf, respectively. However, we did see a storage build in the South Central Salts, which gained 22 Bcf.

Working gas storage inventories now sit at 2.705 Tcf, which is 450 Bcf below last year and 560 Bcf below the five-year average.

At the time of this writing, the February 2019 contract was trading ~$0.017 higher than yesterday’s close of $2.945/MMBtu. However, this price increase happened before the release.

As weather forecasts have moderated, prices have reacted. The volatility that the market saw from mid-November through most of December has dwindled away as the February 2019 contract, which was once trading at $4.77/MMBtu, is now sitting below $3/MMBtu. As the peak of winter is here, should weather forecasts change to predict colder-than-normal temperatures, some volatility would be expected to remain. However, if the weather forecasts continue to predict average to above-average temperatures, especially with the storage deficit compared with last year recovering nearly 175 Bcf week-over-week, expect a lack of volatility and prices to remain in the $3/MMBtu range.

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 January 4, 2019.


  • Dry gas production decreased 1.73 Bcf/d on the week. Most of this change comes from the Mountain (-0.92 Bcf/d) and South Central (-0.74 Bcf/d) regions.
    • Within the Mountain region, decreases from New Mexico (-0.29 Bcf/d), Wyoming (-0.28 Bcf/d), Colorado (-0.19 Bcf/d), and North Dakota (-0.16 Bcf/d) make up the bulk of the change.
    • Within the South Central region, the decrease is mainly due to Texas (-0.58 Bcf/d) and Oklahoma (-0.21 Bcf/d).
  • Canadian imports increased 0.28 Bcf/d week-over-week.


  • Domestic natural gas demand increased 6.19 Bcf/d week-over-week. Res/Com, Power, and Industrial demand increased 2.83 Bcf/d, 2.71 Bcf/d, and 0.59 Bcf/d, respectively.
  • LNG exports decreased 0.17 Bcf/d, while Mexican exports remained relatively flat week-over-week.

Total supply is down 1.45 Bcf/d and total demand increased 6.36 Bcf/d week-over-week. With the increase in demand and the decrease 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 359 Bcf, while the five-year average is a draw of 214 Bcf. When comparing the expected draw of 80 Bcf for next week to last year’s record draw and the five-year average, it exemplifies current market conditions and the bearish sentiment.

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