US natural gas storage volumes declined well below the five-year average last week, but a cold spell looks to prompt a nearly 200 Bcf draw for the week in progress as the remaining Henry Hub winter strip approaches $2.80/MMBtu.
The US Energy Information Administration is expected to report a 123 Bcf withdrawal for the week ended Jan. 8, according to an S&P Global Platts survey of analysts. Responses to the survey ranged from pulls of 107 Bcf to 138 Bcf. The EIA plans to release its weekly storage report at 10:30 am ET Jan 14.
A 123-Bcf pull would be above the 90 Bcf withdrawal reported in the corresponding week last year, but below the five-year average draw of 161 Bcf. A withdrawal within expectations would decrease stocks to 3.207 Tcf. The surplus to the five-year average would rise to 229 Bcf, while the overhang to 2020 would drop to 137 Bcf.
Despite the warm winter so far, storage withdrawals have trended tighter than the five-year average, largely on increased baseload demand from LNG exports, according to S&P Global Platts Analytics. The new year began on an even warmer note, with US temperatures averaging 2 degrees above 10-year normals, reducing residential and commercial demand by 3.6 Bcf/d week on week.
Partially offsetting declines in residential and commercial, gas-fired power generation rose roughly 1 Bcf/d week on week. LNG exports held above 11 Bcf/d for the second week in a row, with the prompt month deliveries to Asia potentially netting over $11/MMBtu. The continued ramp has been driven by cold weather across much of Northeast Asia, in addition to regional supply outages and shipping constraints. Mexican exports recovered about 600 MMcf/d this week, pushing back above 5 Bcf/d.
Those declines, coupled with weeks of steady production growth from Appalachia, the Permian, and the Haynesville, have dropped expectations for this week’s report under the five-year average. The shift is unlikely to last long, as structural trends favor demand.
The NYMEX Henry Hub February contract rose 6 cents to $2.81/MMBtu during trading Tuesday, up 16 cents from the week prior. March, the final full month of the heating season, ticked up 5 cents to $2.75/MMBtu, or 12 cents above the week prior.
With netbacks wide open, utilization at US liquefaction facilities is expected to run at full bore through the rest of the winter, while low strip pricing at Henry Hub should provide an incentive for strong power burn demand in the spring and summer.
Platts Analytics’ supply and demand model expects a 192 Bcf draw for the week ending Jan. 15, which would decrease the storage surplus to the five-year average by 25 Bcf. Cooler weather across much of the US have increased residential and commercial demand to 50 Bcf/d for the week in progress.