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Weekly Natural Gas Storage – 2/23/2017


The EIA announced an 89 Bcf withdrawal for the week ended February 17. The draw was larger than most market expectations, which average 85 Bcf with the full range of forecasts ahead of the release 76 to 95 Bcf withdrawals. The report is bullish as it came in above market expectations and forward prices are trading higher following the EIA report. The March17 contract is currently trading at $2.678 MMBtu, up 8-9 cents from yesterday, at time of writing.

Working gas storage inventories fell to 2.356 Tcf and remain below last year and 5-year high levels by 261 Bcf. However, inventories remain above the 5-year average this week by 157 Bcf. See Drillinginfo EIA’s chart below including projections for end-of-the-season inventories under 5-year average withdrawals and weak withdrawals for the remainder of the season.

Chart 2-23-17
With only one month left of the traditional winter season (Nov-Mar) and weather forecasts continuing to trend warmer, winter 2016-17 is turning to be one of the warmest winter over the past 10 years. The lack of weather has reduced demand significantly over the past months and the increases from LNG and MX exports have not been enough to compensate the losses from Res/Com/Power demand so far this winter.

Looking ahead, mild temperatures will continue to put a cap on price gains. If March weather is also warmer-than-normal, Drilling info still expect a rise in prices however, the increase will be smaller than initially expected. This translates into prices rallying above $3.50 and possibly $4.0 to offset the summer injection short fall currently in the market.

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