For the second week in a row, the U.S. Energy Information Administration (EIA) surprised the natural gas market with a much larger-than-expected storage withdrawal, reporting a massive 161 Bcf pull from inventories for the week ending Dec. 20.
Traders, however, appeared to expect the high-side draw, with prices only briefly bouncing after the government report. Minutes before the EIA data was released, the January Nymex gas futures contract was trading 8.5 cents lower day/day at $2.209. As the print hit the screen, the prompt month moved up to $2.211, down 8.3 cents.
By 11 a.m. ET, however, the January contract, set to expire Friday, was trading at $2.192, down 10.2 cents. February was off by 7.2 cents at $2.213.
Speaking on The Desk’s energy industry chat platform Enelyst.com, the chief meteorologist for Bespoke Weather Services, Brian Lovern, said the market appeared to expect a higher number. “Henry Hub cash being in the $1.70s is not helping matters either.”
Enelyst.com managing director Het Shah noted that the unseasonably warm weather in December has prices sitting near three-month lows. Although prompt-month prices reached similarly low levels this past summer, “that was for the September contract, a shoulder month. This is $2 for January, the coldest month of the year. It doesn’t seem right.”
Estimates ahead of the EIA report ranged widely but generally clustered around a withdrawal in the upper 140s Bcf. A Bloomberg survey showed withdrawals ranging from 139 Bcf to 155 Bcf and had a median estimate of 147 Bcf. A Reuters poll of 12 analysts estimated draws ranging from 136 Bcf to 164 Bcf, with a median of 148 Bcf. NGI projected a 158 Bcf pull.
Last year, the EIA recorded a 61 Bcf withdrawal for the similar week, while the five-year average withdrawal stood at 101 Bcf.
Broken down by region, the Midwest withdrew a stout 50 Bcf draw from storage, and the South Central pulled 48 Bcf out of storage, including a 37 Bcf draw from nonsalt facilities and a 10 Bcf draw from salts, EIA said. The East reported a 42 Bcf withdrawal, and the Pacific posted a 13 Bcf pull.
Shah said weak Henry Hub cash pricing “is keeping the salts from drawing” in the South Central “until late season, when they’ll all draw uneconomically. It could be a bloodbath in March.”
The hefty cumulative 161 Bcf draw tightened up the year/year storage overhang by 100 Bcf and expanded the deficit to the five-year average by 60 Bcf. Total working gas in storage as of Dec. 20 stood at 3,250 Bcf, 518 Bcf higher than last year at this time and 69 Bcf below the five-year average, according to EIA.