Market analysts were expecting the US Energy Information Administration to announce later this week another below-average withdrawal from US natural gas storage for the week ended Dec. 9.
The agency will likely report a 53 Bcf drawdown from inventory during the week, according to S&P Global Commodity Insights’ latest storage survey. The consensus estimate from analysts reflected a wide range of storage-withdrawal predictions for the week, which ran the gamut from 31 Bcf to as much as 75 Bcf.
If accurate, the expected storage pull of 53 Bcf in the week ended Dec. 9 would pale in comparison with the five-year average drawdown of 93 Bcf and fall far short of the year-ago withdrawal of 83 Bcf, both recorded during the corresponding week, EIA data showed.
As a result, the US inventory level would fall to 3.409 Tcf, narrowing this season’s storage deficit to the five-year average to just 18 Bcf, or less than 1%. The shortfall to 2021 would simultaneously narrow to 21 Bcf — also just a fraction of a percent below the year-ago storage level.
NYMEX
The NYMEX Henry Hub January gas futures contract rose for a fifth consecutive day Dec. 13, trading at over $7/MMBtu during the morning session before falling to around $6.90/MMBtu by early afternoon, intraday trade data from The CME Group showed.
After dipping to the mid-$5s/MMBtu in early December, the prompt-month futures contract has been on a tear recently, with most traders now looking past the EIA’s upcoming storage report to near-term weather forecasts. Current models show much colder US temperatures ahead, which are likely to be accompanied by a significant tightening in domestic gas-market fundamentals.
“Some of these forecasts are scary. It’s definitely a weather play right now,” Phil Flynn, senior account executive at the Price Futures Group, said via telephone Dec. 13. “At the same time, we’re going to be reopening the [Freeport LNG] export terminal pretty soon, so the combination of colder weather and higher exports definitely puts us on an upward trajectory.”
Outlook
While the EIA’s upcoming storage report is widely expected to be bearish, near-term weather forecasts appear to be captivating the attention of most NYMEX gas futures traders.
Over 90% of the continental US is at risk for much colder weather from Dec. 18-26, according to the US National Weather Service, with the northern Plains and the Upper Midwest all but certain to see below-average temperatures over that period, the agency’s forecast said.
Over the next several days, the central US is already expected to see sharply colder weather. In the Midwest and the Midcontinent, population-weighted temperatures will fall into the 20s Fahrenheit before the approaching weekend, down from the mid-30s at the time of reporting.
US residential-commercial gas demand could rise by more than 10 Bcf/d over the seven days, hitting a seasonal high of more than 56 Bcf/d by Dec. 19, according to S&P Global’s latest forecast.
Source: Platts