If US natural gas prices remain in the current range through the rest of the season, lower gas power burn would likely reduce withdrawals on a weather-adjusted basis and push storage toward a more balanced level at the end of March, said London based Barclays in its recent report.“However, unless some weeks turn out significantly warmer than normal in the coming months, storage is now heading toward an end-of-March level that is less than our current forecast of 1.8 Tcf,” it added.

Last week, milder weather forecast pressured prices early in the week, until a bullish storage number pushed the prompt month significantly higher on Thursday morning.

Meanwhile, production is recovering from well freeze-offs very slowly. According to pipeline flow estimates, in early December production dropped almost 3 Bcf/d compared with pre-freeze-off levels. As of this Thursday output remained curtailed in the Rockies and Texas shale basins, and aggregate production remains about 0.8 Bcf/d lower than November levels. In the next few weeks, output should continue to rise as temperatures in the west and south are due to become milder in the forecast period, the bank noted.

This week’s storage withdrawal came in much larger than the consensus estimate and pushed prices significantly higher on Thursday morning. Working gas in storage was 3,248 Bcf as of Friday, December 13, 2013, according to Energy Information Administration (EIA) estimates.

This represents a net decline of 285 Bcf from the previous week. Stocks were 488 Bcf less than last year at this time and 261 Bcf below the 5-year average of 3,509 Bcf. In the East Region, stocks were 207 Bcf below the 5-year average following net withdrawals of 132 Bcf.

Stocks in the Producing Region were 23 Bcf below the 5-year average of 1,138 Bcf after a net withdrawal of 99 Bcf. Stocks in the West Region were 31 Bcf below the 5-year average after a net draw down of 54 Bcf. At 3,248 Bcf, total working gas is within the 5-year historical range.
Source: Barclays