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Natural Gas Inventories See Unusually Strong Draw

The EIA announced a 147 Bcf withdrawal for the week ended Dec. 9. The draw was higher than average market expectations. The full range of forecasts ahead of the release was -114 to -144. The 147 Bcf draw is the largest over the past 5 years and compares to a 46 Bcf draw reported last year and a five-year average withdrawal of 79 Bcf.

The storage report is bullish as prices went up following the EIA report. Prompt month (Jan17) is currently trading up 2-3 cents to 3.567/MMBtu, at time of writing.

Working gas storage inventories dropped to 3.806 Tcf, taking stocks below 2015 and 5-year max for the first time since April. Inventories remain above the 5-year average by 186 Bcf or 5%.

(Click to enlarge)

Winter weather remains as the leading factor impacting prices over the past weeks. The 10-15-day weather forecasts weakened causing gas prices to lose over 20 cents per MMBtu on Monday, but have since gained some of them back.

Fundamentals

- Supply: Dry Gas is up this week as production recovered from the lows seen last week due to freeze offs. Despite the cold weather, the Northeast has not seen lower production so no indication of freeze offs in the region. Canadian imports are higher this week to meet incremental demand in the East region.

- Demand: December colder-than-normal temperatures has residential and commercial demand up over 10 Bcf/d higher compared to a year ago, and the trend will continue throughout the rest of the month.

Looking ahead, storage inventories are now below record highs and withdrawals will continue strong for at least three more weeks including a potential ~200 Bcf draw on next week’s storage report. Therefore, price gains are expected to continue in the near term. However, the size of the gains will depend on weather projections, particularly deviations from normal beyond the 15-day period.

By Maria Sanchez via DrillingInfo

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