Perhaps in anticipation of a smaller-than-expected natural gas storage withdrawal report, February natural gas futures on Wednesday morning sunk lower, which was compounded by the noon EST report, which revealed that only 143 Bcf was extracted from underground inventories for the week ended Dec. 26. The contract ended up closing Wednesday’s regular session at $5.622, down 23.7 cents from Tuesday’s close.
After falling to $5.705 just prior to the Energy Information Administration (EIA) report, the prompt-month contract plummeted to carve out the day’s low at $5.477 just a few minutes later. The contract rebounded to close in afternoon trade.
“It was certainly a smaller-than-expected withdrawal, and it came on a very thinly traded day, which exaggerated the reaction,” said Tom Saal, a broker with Hencorp Becstone Futures LC. “There is a lack of participation because a lot of folks just aren’t in their offices. Without the liquidity, this thing can get pushed around quite a bit. While the draw was smaller than expected, seasonally speaking it was a very big withdrawal.”
Citi Futures Perspective analyst Tim Evans blamed the smallish build on the lack of Christmas demand. “The DOE reported a smaller-than-expected 143 Bcf net withdrawal from natural gas storage for the week ended Dec. 26, as the Christmas holiday likely took a larger-than-expected bite out of the demand side of the market,” he said. “The shortfall is sufficiently material that we’ll be cutting our forward estimates as well. The draw was still supportive relative to a five-year average of just 100 Bcf, however, so the year-on-five-year average surplus was still reduced from 99 Bcf as of Dec. 19 to 56 Bcf on Dec. 26. This fundamentally supportive trend should ultimately limit the downward price pressure in response to the report.”
Evans had been expecting a 170 Bcf draw, while a Reuters survey of 17 industry players produced withdrawal expectations from 100 Bcf to 189 Bcf with an average pull expectation of 151 Bcf. Industry consultant Bentek Energy, using its nationwide flow model, expected a withdrawal of 155 Bcf. Only 109 Bcf was removed last year for the similar week.
As of Dec. 26, working gas in storage stood at 2,877 Bcf, according to EIA estimates. Stocks are now 69 Bcf less than last year at this time. The East Region withdrew 100 Bcf and the West and Producing regions pulled out 22 Bcf and 21 Bcf, respectively.
Effective Thursday (Jan. 8) EIA said it will return to the original time of 10:30 a.m. EST for standard releases of the Weekly Natural Gas Storage Report.
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