January natural gas futures settle slightly higher in muted response to ‘juicy’ storage drawdown

Nymex January natural gas futures ended Thursday’s session on a swing slightly higher at $2.585/MMBtu. The future it got a little new directional support from a draw from natural gas stocks that was bigger than most expected.

At the first sight:

  • Storage down 117 Bcf
  • Supply/demand anchors
  • Reserves could reach 4 Tcf

The front-month contract soon fell to an intraday low of $2,489 and rose to an intraday high of $2,621 following the release of storage data from the Energy Information Administration (EIA) this morning. However, it quickly reversed the gains to settle at 1.6 cents. February futures traded between $2,436 and $2,555 and settled 0.11% higher at $2,520.

Spot NGI National avg. fell 73.0 cents to average $2,300. The northeast once again led the daily retreat to forecast warmer weather.

The EIA reported in its report at 10:30 a.m. ET 117 Bcf of natural gas was withdrawn from storage for the week ending December 1.

Before going to press, NGI was modeling a withdrawal of 106 Bcf. That compares to a five-year average withdrawal of 48 Bcf and previous withdrawals of 30 Bcf.

Estimates provided to Reuters ranged from withdrawals of 97 Bcf to 126 Bcf, with a median draw of 105 Bcf. A Bloomberg survey spanned estimates of a draw of 102 Bcf to a draw of 119 Bcf, yielding a median draw of 107 Bcf. Average z The Wall Street Journal survey was a reduction of 110 Bcf.

EBW Energy Group analyst Eli Rubin said: “From the market’s perspective, the soft December forecast amplifies the impact of repeated bearish fundamental shocks that will exacerbate the oversupply of natural gas projected for 2024.”

One participant on online energy platform Enelyst called the weekly storage number a “juicy number.”

But analysts Gelber & Associates said: “Even such a bullish pullback appears to have done relatively little to shake the prevailing bearish sentiment given the current oversupply, whose chances of sticking through the winter continue to increase as the weeks go by.”

The EIA reported Thursday that the Lower 48 ended the injection season at 3,776 Bcf and enters the winter heating season with the most natural gas in storage since 2020.

Storage withdrawals for the week of Dec. 1 reduced inventories to 3,719 Bcf. Still, the surpluses are 234 Bcf above the five-year average of 3,485 Bcf and 254 Bcf above the previous year’s level of 3,465 Bcf.

“Due to widespread above-normal temperatures last week and for most of the next 15 days, the next three EIA reports are expected to print a decently lighter than normal draw to increase surpluses to 350 Bcf,” NatGasWeather said.

Early estimates on Enelyst for the storage report for the week ending Dec. 8 ranged from withdrawals of 36 Bcf to 79 Bcf. That would compare with a draw of 46 Bcf a year earlier and a five-year average decline of 81 Bcf.

NatGasWeather said that unless cooler patterns emerge in late December and early January, surpluses could approach 400 Bcf.

Is winter coming?

Weather systems with little subfreezing air are set to track across the United States over the next four days, according to a midday forecast update from NatGasWeather. High temperatures in northern parts of the country are expected to be in the 30s to 50s, while southern areas are forecast for comfortable conditions with highs in the 50s to 70s.

Colder weather systems with rain and snow are expected across the country by the middle of the month as lows drop into the 10s to 30s, NatGasWeather said. However, “weather data at night and midday are not so cold with them”.

The firm said warmer-than-normal temperatures will sweep across much of the United States from Dec. 16 to 21. NatGasWeather noted that there is “a small chance that weather systems will be able to draw in enough freezing air to make an impact”.

Supply, demand pressures

Included in the bearish fundamentals, Rubin noted that the past two months marked the largest two-month increase in natural gas production (excluding recovery from the freeze) since 2017.

Wood Mackenzie data showed natural gas production was flat at 104.5 Bcf/d on Thursday.

“And now LNG demand is facing delays,” Rubin said.

Energy giant ExxonMobil said this on Wednesday Golden Pass for liquefied natural gas Train 1 “mechanical completion” was not expected until the end of 2024. The first LNG deliveries are due in the first half of 2025.

Price Futures Group senior analyst Phil Flynn told NGI: “Natural gas is dressed but nowhere to go. He said record natural gas production with a delayed increase in LNG export capacity would keep natural gas prices under wraps.

Analyst at Tudor, Pickering, Holt & Co. Matt Portillo agreed. “This shift in the timing of LNG demand affects our forecast repository until the end of October 2024 with our model now pointing to a balance of around 4.1 Tcf and conversely lowering our expectations for natural gas prices in 2024…

“Ultimately, we think the market will force the industry to reassess drilling and completion activities in gas reservoirs in 2024 (partially through the drill bit, but mostly post-completion).

More cash losses

Spot gas trades in centers across the country continued to decline with little support from natural gas futures or weather-driven demand.

NatGasWeather said nationwide light demand is expected Friday and forecast even weaker demand for the weekend as “an unusually warm ridge rises over the eastern United States.”

Milder weather resulted in another day of sharp losses in cash gas deals in Northeast delivery points.

Tea Northeast Regional Avg. fell $3,595 day/day to $3,295. Maritime and Northeast and Algonquin City Gate led the retreat. Losses of $6,700 and $6,555 bring the Maritimes & Northeast average to $5,800 and Algonquin Citygate to $3,240.

Bids for Friday’s flow in California centers also collapsed. Southern Border, PG&E is trading down 99.5 cents to average $2,980. Avg. SoCal borders trades averaged $3,185, down 87.5 cents. Smart also fell, down 80.5 cents to average $2,995. Tea Area Avg. was 87.0 cents lower at $3,275.

The smallest drop of the day was in the Midcontinent, where Midcontinent Regional Avg. fell 21.0 cents to $2,020. Tea Appalachia Region Avg. fell 23.0 cents to $1,910.

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