The Energy Information Administration's (EIA) natural gas storage report Friday morning of a 47 Bcf withdrawal for the week ended Dec. 29 proved once again that the United States has no lack of gas supply. February natural gas reached a low of $6.030 in late morning trade before closing at $6.184, up 2.2 cents on the day.
Despite the bearish withdrawal, it seemed to already have been factored into futures prices as the February contract hardly flinched upon the report's release. The prompt month was trading at $6.150 leading up to the report, and on its release, which was delayed till just after 10:40 a.m. EST, the February contract put in a $6.110 tick before immediately returning to the $6.150 price area.
"Although it was delayed by about 10 minutes or so, a 47 Bcf withdrawal certainly falls within market expectations, not that there's anything new on that front," said Jay Levine, a broker with enerjay LLC. "A cold front, now that would be new."
A Washington DC-based broker said there really is not much talk going on in the natural gas arena. "Nobody has been talking about any of the structural fundamental issues or anything like that," he said. "It is amazing how quiet the natural gas market chatter has been. Normally, there would be some back and forth between bullish and bearish viewpoints, but because there has been no weather, no one has brought out the 'yes, but' arguments. Instead, people have just been speechless except for noting how warm it is.
"The storage report really didn't catch many off guard," he added. "We did some trading on the day, but there weren't really any big deals going through. The market seems to be trying to hold this level of a little north of $6. If we manage to continue that trend deep into this week, then things could get interesting as this 'dead man walking' feel in the market from no weather could lift."
Looking at Fibonacci numbers, the broker noted that the 61.8% retracement of the whole up-move brings the market down to $5.950. "We have only penetrated that one day, so if that keeps holding, then we might have something here," he said. "If it breaks below $5.95 meaningfully, then you flush out any length you're holding because it is 'look out below' time. While there is no weather, I think the bears right now have a quicker trigger and would bail on any length that they have."
Weather data suggested a light storage draw. The National Weather Service (NWS) reports that the U.S. recorded just 154 heating degree days (HDD) for the week ended Dec. 30, which is 47 below normal. For the entire heating season, the U.S. tally stands at 1,535 HDD, or 175 below normal.
The 47 Bcf withdrawal came in on the low side of most estimates. It also outpaced last year's 22 Bcf pull, but fell well short of the five-year average 100 Bcf withdrawal. The withdrawal left storage supplies at 3,074 Bcf, which exceeds the record 3,068 Bcf tallied at the end of December 1990, according to EIA figures.
A Reuters survey of 20 industry players had been calling for a median withdrawal of 57 Bcf, while the ICAP auction resulted in a 49.5 Bcf withdrawal expectation. Golden, CO-based Bentek Energy was expecting a 45 Bcf pull using its Flow model methodology, while its Supply/Demand Balance model projected a withdrawal of 51 Bcf.
As of Dec. 29, stocks were 433 Bcf higher than last year at this time and 408 Bcf above the five-year average of 2,666 Bcf. The East region saw a 33 Bcf withdrawal for the week, while the West and Producing regions removed 9 Bcf and 5 Bcf, respectively.
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