The last gas storage withdrawal of the cold season might be on us today, opening the debate for where prices could go through the hotter months of 2019, when cooling demand kicks in.
The U.S. Energy Information Administration is likely to say in its weekly report on natural gas due at 10:30 AM ET (14:30 GMT) that utilities pulled 40 billion cubic feet from storage last week, to run heaters during a mildly cold period before the end of winter. In the previous week to March 15, the EIA reported a withdrawal of 47 bcf.
Natural Gas 300-Min Chart
The EIA report comes a day after natural gas futures for May delivery on the New York Mercantile Exchange’s Henry Hub fell for a fourth straight day, settling down 3 cents, or 1.2%, at $2.719 per million British thermal units. Wednesday’s session bottom was $2.691, the lowest in a month.
Dominick Chirichella, director of risk and trading at the Energy Management Institute in New York, said the price action matched the beckoning temperatures of spring, where neither strong heating nor intense cooling demand would be expected for a while.
He added:
“Unseasonable warmth will return to the East and South later this week while the central U.S. turns colder this weekend. With above-normal temperatures projected to engulf most of the U.S. in the 8/14 day forecast, heating-related demand will wind down quickly.”
“This is possibly the last withdrawal of the season. Injections could start as early as in next week’s report or at the latest the following week.”
A Reuters’ study of the weather for last week showed there were 130 heating degree days, compared with 138 HDDs in the same week a year ago and a 30-year normal of 123. HDDs measure the number of degrees a day's average temperature is below 65 Fahrenheit (18 Celsius) and are used to estimate demand to heat homes and businesses.
Chirichella pegged immediate support for May gas at $2.62, and resistance at $2.79.
In Wednesday’s trade, Henry Hub futures for June through August didn’t go much above $2.60 either – showing lackluster bets at this point for cooling during the peak summer months.
Dan Myers, analyst at Houston-based gas market consultancy Gelber & Associates, had an outlook similar to Chirichella’s, saying:
“This will be the last meaningful withdrawal of the season, although demand in the current week could still result in a very marginal net decrease in the following storage report.”
But Myers said market attention was also on whether spring warmth would rise appreciably by the week of April 12, allowing for the “first notable, above-average injection into storage.”
If a 40-bcf gas withdrawal for last week is confirmed by the EIA, it would be the smallest in more than seven months. The agency’s data shows the previous low for gas burns was during the week ending Aug. 16, when just 33 bcf was used up.
Early estimates for this week’s withdrawals were in a 15-50 bcf range. That compares with the 30-bcf decline from a year ago, and a five-year average decrease of 23 bcf.