Natural gas storage inventories decreased 149 Bcf for the week ending March 1, according to the EIA’s weekly report. This draw meets the market expectation, which was an inventory decrease of 150 Bcf.
Working gas storage inventories now sit at 1.390 Tcf, which is 243 Bcf below inventories at the same time last year and 464 Bcf below the five-year average.
At the time of this writing, the April 2019 contract was trading at $2.857/MMBtu, $0.016 above yesterday’s close of $2.841/MMBtu. However, these gains came before the storage release.
Last week, as the cold temperatures became more of a sure thing for early March, prices gained traction and the April 19 contract closed the week at $2.859/MMBtu. Prices remained in a range of $2.841 and $2.884 this week. The cold weather is expected to subside and return closer to normal weather later in March. If forecasts turn cold for later in March, the trade may extend to the March expiration highs of $2.908/MMBtu but will be met with selling between $2.93 and $2.98.
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 Bloomberg’s flow data and DI analysis for the week ending March 7, 2019.
- Dry gas production decreased 1.25 Bcf/d on the week, driven by losses in the South Central/Gulf (-1.07 Bcf/d) region. Oklahoma (-0.70 Bcf/d) and Texas (-0.47 Bcf/d) were the drivers of the loss in the South Central, mainly due to freeze-offs early in the week. This decline is expected to recover in the coming weeks as temperatures increase.
- Canadian net imports increased 0.61 Bcf/d on the week. Flows into the Midwest and Northeast regions of the US increased because of colder weather, causing the jump in Canadian net imports.
- Domestic natural gas demand increased 9.94 Bcf/d week over week. Res/Com increased 7.31 Bcf/d week over week, while Power and Industrial demand gained 1.72 Bcf/d and 0.91 Bcf/d, respectively.
- LNG exports fell 0.16 Bcf/d, while Mexican exports increased 0.03 Bcf/d on the week.
Total supply is down 0.64 Bcf/d, while total demand increased 10.05 Bcf/d week over week. With the drop in supply and the gain in demand, expect the EIA to report a stronger draw next week. The ICE Financial Weekly Index report is currently expecting a draw of 220 Bcf for next week. Last year, the same week saw a draw of 93 Bcf, while the five-year average is 77 Bcf.
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