U.S. natural gas storage fields post another above-average drawdown as season draws to a close

Strong points

Henry Hub summer band climbs 11 cents

US production rebounds ahead of summer injections

U.S. natural gas inventories fell well above average levels again as the heating season enters its final weeks before summer injections begin.

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Storage fields removed 124 billion cubic feet for the week ended March 4, according to data released by the US Energy Information Administration on March 10.

Working gas inventories fell to 1.519 Tcf. U.S. storage volumes now stand at 281,100 cu. than the five-year average of 1,809,000 cubic feet.

The pullback was higher than the 120 billion cubic feet drawdown expected by a survey of analysts from S&P Global Commodity Insights. It also topped the five-year average shrinkage of 89 billion cubic feet and more than doubled last year’s shrinkage of 59 billion cubic feet in the corresponding week.

The Midwest region accounted for 40,100 cu ft of weekly extraction, as it is now the most undersupplied of the EIA’s five storage regions compared to the five-year average. Despite the shortage, the Midwest is expected to receive higher imports from Canada this summer, which should allow it to inject plenty of gas this summer.

S&P Global Commodity Insights expects Midwest imports to be strong at 3.9 billion cubic feet per day this summer. Storage stocks in Western Canada are at 210 billion cubic feet, 50 billion cubic feet below the five-year low for this period. However, strong production is expected to strain NGTL’s pipeline this summer and limit injections.

Even during periods when there are no constraints, the AECO Winter 22-23 band is probably too weak to encourage heavy injections. Technically, the gap between AECO’s Summer 22 and Winter 22-23 band is 37 cents/MMBtu, which should be enough to quickly fill storage. However, AECO’s Summer Band 22 is trading 90 cents to $1 behind Chicago, implying that the market expects constraints on the NGTL system.

The NYMEX Henry Hub April contract added 10 cents to $4.63/MMBtu on March 10, down 7 cents from the previous week. The summer band, from April to October, climbed 11 cents to average $4.73/MMBtu, down 4 cents week-over-week.

A forecast from S&P Global calls for a drawdown of 49 billion cubic feet for the week ending March 11, which would be 16 billion cubic feet less than the average drawdown. The following week points to a drawdown in line with the average. The last net drawdown of the season usually occurs for the week ending March 25.

The U.S. storage forecast for the end of March was lowered by 200 billion cubic feet from last month’s forecast to 1.46 billion cubic feet after several withdrawals of more than 200 billion cubic feet in 2022, according to S&P Global. The resumption of the upward trend in U.S. production will allow inventories to inject at a stronger pace this summer, reaching 3.65 billion cubic feet, 100 billion cubic feet lower than previously forecast, but consistent with the five-year averages.

U.S. production is expected to rebound to 95 Bcf/d in March, with the 2022 balance averaging 96.1 Bcf/d after lows in January and February when well freezes pushed production down to a lower average at 93 Bcf/d.


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