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Weather-Focused Natural Gas Futures Slip After On-Target EIA Storage Report

The Energy Information Administration (EIA) on Thursday reported an on-target 81 Bcf withdrawal from U.S. natural gas stocks that prompted some futures selling but generally left the market to focus on the impact of Arctic cold set to spill into the Lower 48 starting this weekend.

Another in a run of deficit-shrinking storage reports thanks to relatively mild conditions for much of the country in recent weeks, the 81 Bcf pull for the week ended Jan. 11 looks meager compared to both the 208 Bcf withdrawal EIA recorded for the year-ago period and the five-year average 218 Bcf withdrawal.

But market participants had been looking for a light withdrawal in line with the actual figure. Major surveys this week had pointed to a pull of around 76-82 Bcf. Intercontinental Exchange EIA Financial Weekly Index futures settled Wednesday at a withdrawal of 84 Bcf.

Prior to the 10:30 a.m. ET release of EIA’s report, the February Nymex futures contract was up about 15 cents from the prior day’s settle, helped by overnight guidance that advertised the potential for intense cold expected for the final third of January to stretch into early next month.

As the 81 Bcf figure crossed trading screens, the February contract traded as high as $3.554 and as low as $3.501 before settling back into a range of around $3.530-3.540, within pennies of the pre-report trade. By 11 a.m. ET, February had slipped to around $3.447, up about 6.3 cents from Wednesday’s settle.

Bespoke Weather Services said the on-target withdrawal, which came within 2 Bcf of its 83 Bcf estimate, helps explain larger misses from EIA’s report over the prior two weeks as holiday noise.

“The market continues to remain around 2 Bcf/d loose to the five-year average,” with a dip in production offset by recent warmth, Bespoke said. But “we are clearly trending tighter now that cold air is arriving. However, this balance confirms that weather will be the dominant price catalyst moving forward. Balances may be able to tighten enough to put 1 Tcf end-of-season in play if we max cold through the winter, but our estimate of 1.16 Tcf is more likely as cold should ease into March.”

Total Lower 48 working gas in underground storage stood at 2,533 Bcf as of Jan. 11, 77 Bcf (3.0%) below last year’s stocks and 327 Bcf (11.4%) below the five-year average, according to EIA.

By region, EIA reported a 34 Bcf withdrawal in the Midwest, with the next largest pull occurring in the East at 31 Bcf. The Pacific withdrew 8 Bcf for the week, while the Mountain region pulled 5 Bcf. In the South Central, a 6 Bcf withdrawal from nonsalt offset a 1 Bcf injection into salt stocks, according to EIA.

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