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US natural gas in storage dropped by less than expected in what might be the final draw of the heating season, yet Henry Hub futures continue to build on recent gains as the summer and winter strips sail higher above $5/MMBtu.
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Storage fields withdrew 51 Bcf for the week ended March 18, according to data released by the US Energy Information Administration on March 24.
Working gas inventories decreased to 1.389 Tcf. US storage volumes now stand 366 Bcf less than the year-ago level of 1.784 Tcf and 293 Bcf less than the five-year average of 1.744 Tcf.
The withdrawal was weaker than the 62 Bcf draw expected by an S&P Global survey of analysts. Responses to the survey were wide, as they have been much of the current shoulder season, ranging from from 50 to 96 Bcf withdrawal. It was less than the five-year average pull of 62 Bcf but more than the 29 Bcf draw reported in the corresponding week in 2021.
The only EIA storage region to report a net injection during the week was the Pacific. The region is also the closest to the five-year average at a 9% deficit. Supply issues have caused extreme price volatility in the region during high demand periods of summer over the past several years. However, adequate supply for the upcoming summer might keep that in check this year.
SoCal Gas demand has been flat this winter from last winter at 2.8 Bcf/d, according to data by S&P Global Commodity Insights. Receipts, however, have jumped roughly 120 MMcf/d winter over winter to 2.7 Bcf/d. The stronger receipts and flat demand throughout the whole of the winter allowed injections to average 62 MMcf/d, over 100 MMcf/d lower year on year from last winter. This expanded year-on-year gains to 17 Bcf by March 11, when inventories fell to 71 Bcf.
Since March 11, the region has flipped to only net injections, suggesting March 11's 71 Bcf is the low of this season. Last year, SoCal inventories reached a low of 52 Bcf on March 27. At 71 Bcf, the region would need to average injections of 90 MMcf/d to reach their 92 Bcf capacity by Nov. 1, 30 MMcf/d lower year on year. Since March 11, however, injections have averaged 151 MMcf/d. If this pace continues, SoCal inventories could instead fill in late July. High inventories and faster-than-normal injection rates should add downside risk to SoCal city-gate throughout the summer.
The NYMEX Henry Hub April contract surged 15 cents to $5.37/MMBtu following the EIA's storage report release on March 24. The summer strip, April through October, jumped 14 cents to $5.46/MMBtu. The 2022-23 winter strip, November through March, added 12 cents to $5.53/MMBtu. Henry Hub futures across the board have climbed steadily over the past week.
A forecast by S&P Global calls for a 50 Bcf injection for the week ending March 25. This would be a dramatic departure from the average for the week, which is a 23 Bcf withdrawal.
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