The EIA announced a 114 Bcf withdrawal for the week ended February 10. The report is bearish as it came in below market expectations in the 120s Bcf. Natural gas prices opened lower ahead of the report and losses increased following the storage withdrawal 3-4 cents. The March 2017 prompt contract is currently trading at $2.884 per MMBtu at time of writing.
Working gas storage inventories fell to 2.445 Tcf and remain below last year and 5-year high levels by 303 Bcf. Inventories remain above the 5-year average this week by 87 Bcf. See Drillinginfo EIA’s chart below, which now includes projections for end-of-the-season inventories under 5-year average withdrawals and weak withdrawals for the remainder of the season.
Weather forecasts continue trending warmer-than-normal, which pushed the March contract below the $3.00 mark. The April contract is also trading below $3.00 at $2.995 following the bearish EIA report. In the very short-term (1-2 weeks), prices will continue to be pressured due to lack of winter-like temperatures. However, the longer-term picture remains bullish and Drillinginfo continues to call for a rise in prices in 2017 to incentivize gas-direct drilling activity. Current natural gas production levels are concerning, 2017 YTD dry gas production is not only below last year (2016), but also below 2015 levels. This level of production is not sufficient to meet growing structural demand for power, LNG and Mexican exports.
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