DI Blog

Insights across the energy value chain

Natural gas storage inventories decreased by 359 Bcf for the week ended Jan. 5, per EIA. This draw sets a record as the largest weekly withdrawal, topping the 288 Bcf draw reported during the January 2014 polar vortex.

The report is bullish, as the withdrawal came in above most market expectations. Natural gas prices are up following the report, with the February 2018 contract trading at $3.07, up $0.16 per MMBtu from yesterday.

Today’s storage withdrawal compares with a 151 Bcf draw reported last year and the 5-year average of 183 Bcf. Working gas storage inventories dropped to the 2.767 Tcf level, 415 Bcf below last year and 382 Bcf below the 5-year average.

See the chart below for projections of end-of-season storage inventories as of April 1, the end of the withdrawal season. The larger-than-historical withdrawals reported over the past weeks due to the extreme cold temperatures have pushed these projections down. If storage withdrawals come in at the 5-year average rate over the rest of the withdrawal season, inventories will fall to 1.4 Tcf. This level is on the low side of the range and would put upward pressure on prices.

This Week in Fundamentals
The summary below is based on PointLogic’s flow data and DI analysis for the week ending 01/11/2018.

  • Supply:

– Dry gas production is up 1.9 Bcf/d as freeze-offs ended, letting production recover from losses from the prior week. However, gas production remains down by about 1 Bcf/d compared to levels seen in December 2017.

– Canadian imports are down 1.7 Bcf/d as cold temperatures moderated lowering demand needs in the East.

  • Demand: Demand is down week-on-week as temperatures fell from record cold levels.

– Natural gas demand in the U.S. is down 30 Bcf/d, including a drop of 21.5 Bcf/d from the residential/commercial sector. Power and industrial demand also decreased by 5.9 Bcf/d and 2.6 Bcf/d, respectively.

– LNG exports are down 0.9 Bcf/d, mainly driven by maintenance at the Gillis compressor in Louisiana that limited Transco deliveries into Sabine Pass.

– Mexico exports increased by 0.23 Bcf/d.

  • Total supply is down 0.2 Bcf/d, and total demand declined by 33.3 Bcf/d. A lower withdrawal is expected next week, in the 180-190 Bcf range. This draw compares to a 200+ Bcf withdrawal reported last year and also the 5-year average.

 

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