Weekly Natural Gas Storage 2-2-2017

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The EIA announced an 87 Bcf withdrawal for the week ended Jan. 27. The draw was in line with market expectations, which average 88 Bcf with the full range of forecasts ahead of the release -70 to -115. Similar to last week, the 87 Bcf draw is significantly lower than historical draws for this week and compares to a 169 Bcf draw reported last year. Natural gas prices have been bearish this week losing about 30 cents compared to levels seen last week. The March (prompt) contract is down 4 cents this morning, relatively unchanged following the EIA report at $3.125 per MMBtu, at time of writing

Working gas storage inventories fell to 2.711 Tcf and remain below last year and 5-year high levels by 266 Bcf, however inventories are now above the 5-year average for the first time since early December by 59 Bcf. See Drillinginfo EIA’s chart below.

Weekly Natural Gas Storage 2-2-2017

Looking ahead, cold weather is returning and expected to reach areas as much South as Texas. Colder temperatures are projected not only in the next week, but most models also agree with an extended cold period over the 5-10 day forecast. As demand increases, natural gas production remains weak at levels below 71 Bcf/d. This level compares to 72-73 Bcf/d production seen last year. On the demand side, in addition to higher Res/Com and power, LNG and Mexican exports are also contributing to higher demand and in January demand totaled almost 5 Bcf/d above last year. Despite this bullish picture, natural gas prices are struggling to reach levels north of $3.20 per MMBtu. Drillinginfo continues to call for a rise in prices to facilitate additional investment in gas-directed drilling. This rise is expected to happen his spring as market participants face a low end-of-season inventory due to lack of production growth, normal domestic demand and growing exports via LNG and Mexico.

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