DI Blog

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Natural gas storage inventories decreased 78 Bcf for the week ending February 8, according to the EIA’s weekly report. This draw is below the market expectation, which was a decrease of 83 Bcf.

Working gas storage inventories now sit at 1.882 Tcf, which is 30 Bcf below last year and 333 Bcf below the five-year average.

At the time of this writing, the March 2019 contract was trading at $2.603/MMBtu, $0.028 above yesterday’s close of $2.575/MMBtu. However, these gains came before the release of the report.

With above-average temperatures last week, prices weakened and tested the multiyear low range between $2.522/MMBtu and $2.568/MMBtu. This range has been able to hold all declines since the June ’16 breakout, and was successful once again. Weather forecasts turned colder for the remainder of February early in the week, causing a brief price rally, with the March 2019 contract reaching $2.688/MMBtu. However, these gains could not hold as weather models turned slightly warmer overnight, and prices fell below $2.60/MMBtu. As the peak of winter nears an end, forecasts of colder weather may bring brief rallies like the one seen early this week, but these rallies will be limited, with the market being more comfortable with storage inventories and the end-of-season projections.

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 February 14, 2019.

Supply:

  • Dry gas production increased 0.41 Bcf/d on the week, mainly driven by the East region (0.44 Bcf/d). Pennsylvania (0.26 Bcf/d) and West Virginia (0.16 Bcf/d) were the drivers of the increase in the region.
  • Canadian net imports were up slightly on the week, gaining 0.06 Bcf/d.

Demand:

  • Domestic natural gas demand increased 12.26 Bcf/d week over week. Res/Com demand led the increase, gaining 7.55 Bcf/d. Power and Industrial demand also increased 3.25 Bcf/d and 1.09 Bcf/d, respectively.
  • LNG exports climbed 1.57 Bcf/d. Weather issues in the GoM subsided, and ships were able to reach port. Mexican exports decreased 0.03 Bcf/d on the week.

Total supply is up 0.47 Bcf/d, while total demand gained 13.80 Bcf/d week over week. With the gain in demand outpacing the gain in supply, expect the EIA to report a stronger draw next week. The ICE Financial Weekly Index report is currently expecting a draw of 176 Bcf for next week. Last year, the same week saw a draw of 124 Bcf, while the five-year average is 160 Bcf.

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