New York February 2 2022: US natural gas inventories likely posted the largest weekly withdrawal since last February's winter storm as the Henry Hub prompt-month contract approaches $5/MMBtu ahead of another cold front featuring freeze-off potential.
The US Energy Information Administration is expected to report a 274 Bcf withdrawal for the week-ended Jan. 28, according to a survey of analysts by S&P Global Platts. Responses to the survey ranged from a 261 to 292 Bcf withdrawal. The EIA plans to release its weekly storage report on Feb. 3.
The week ended Jan. 28 was likely the peak for the winter 2021-22 heating season, according to S&P Global Platts Analytics. It will probably prove to be the week featuring the strongest daily demand average and, accordingly, peak withdrawals from US storage fields. A milder weather forecast in the weeks ahead indicates that things won't hit such high demand levels going forward as they were last week.
A 274 Bcf withdrawal would dwarf the five-year average draw of 150 Bcf and the 150 Bcf pull reported during the corresponding week in 2021. It would reduce stocks to 2.317 Tcf. The deficit to last year would expand to 399 Bcf. The deficit to the five-year average would balloon to 149 Bcf.
The NYMEX Henry Hub March contract shed 3 cents $4.84/MMBtu during the trade day on Feb. 1. Every forward contract closed above $4/MMBtu through March 2023. On Jan. 27, the Henry Hub prompt month closed above $6/MMBtu and hit its highest mark since 2008, which was the dawn of the US shale revolution.
A forecast by Platts Analytics calls for a draw of 209 Bcf for the week ending Feb. 4, with another 200-plus Bcf likely for the following week.
The market is monitoring a winter storm set to roll through the Midwest and North Texas, which may pose upside risk to region hubs' cash basis prices, according to Platts Analytics. The National Oceanic and Atmospheric Administration forecasts temperatures in Oklahoma City will peak at 34 degrees Fahrenheit Feb. 2, followed by a high on Feb. 3 around 19 F with likely chances of snow on both days.
The cold blast could prompt bullish cash basis swings, as production in both Oklahoma and the Permian is expected to be at risk of freeze-offs, while demand is forecast to spike. NGPL Midcon for Feb. 1's gas day traded at a 71-cent/MMBtu discount to Henry Hub on Jan. 31, up 4 cents day on day, and is likely to strengthen further as the full storm impacts are seen.