Weekly U.S. Natural Gas Storage UpdateGMP First Energy Dec 28th
Weekly U.S. Natural Gas Storage Update Our forecast for this week’s gas storage report is for a withdrawal of 243 bcf. The past week was one of the coldest seen for the U.S. in December in many years. We think the storage withdrawal will also live up to the hype as the weather last week was an intensification of the cold from the prior week, and there were clear indications that some regions were drawing heavily on storage to meet demand and to keep pipeline linepack beefed up to specifications. Both would have required strong draws from storage.
As can be so fickle, weather forecasts have again begun to shift back to a much colder stance for January, after what appears to be a brief warm up over the typically slow demand holiday week between Christmas and New Year’s. Prices have responded higher, and we think it is now just a matter of when, not if, that we see a US$4 handle on prices for a period of time. If pushed to call a ceiling for prices, we think between US$4.25 and US$4.50 per mmbtu are about as far as prices could go, if the forecasted severe cold snap lasts for several weeks. We think such a price level would be sufficient to back out gas demand in the power generation sector in a large way, and likely curtail some industrial demand. Moreover, we might finally see some supply response at such price levels, provided Producers can get their supply to market.
Including our forecast above and our assessment for next week’s withdrawal, December could see a cumulative withdrawal around 700 bcf. This would be one of the strongest withdrawals on record for the month and comparable to the Polar Vortex winter which included December 2013 with a withdrawal at 714 bcf. Importantly, such a withdrawal would be more than 400 bcf greater than the miserly withdrawal of December 2015 at just 264 bcf, which was one of the smallest withdrawals on record for the month.
With this latest weekly release, we have introduced a third page covering daily and weekly pipeline scrape data for the United States. We include estimates of total domestic supply, gas supplies from the Northeast (defined as Ohio, Pennsylvania and West Virginia), as well as several demand components covering power generation, space heating (residential/commercial), and the exports of U.S. gas to LNG and to Mexico.
As always, we appreciate any feedback regarding this material and suggestions for improvement. Based on forecast degree days, we expect next week’s report to show a withdrawal between 80 and 100 bcf. We wish all of our readers and clients the very best of success in 2017.