Natural gas supplies in the United States fell less than projected, but the price rise continues

Despite the fact that natural gas storage in the United States fell less than predicted in what may be the last draw of the heating season, Henry Hub futures are continuing to build on recent gains as the summer and winter strips soar higher beyond $5/MMBtu.

According to statistics issued by the US Energy Information Administration on March 24, storage fields withdrew 51 Bcf for the week ending March 18.

Stockpiles of working gas fell to 1.389 Tcf. Storage volumes in the United States are presently 366 Bcf lower than a year earlier, at 1.784 Tcf, and 293 Bcf lower than the five-year average of 1.744 Tcf.

The drawdown was less than the 62 Bcf projected by experts polled by S&P Global. The poll received a broad range of responses, as has been the case for most of the current shoulder season, ranging from 50 to 96 Bcf withdrawal. It was lower than the five-year average of 62 Bcf, but higher than the 29 Bcf draw in the same week in 2021.

The Pacific was the only EIA storage zone to record a net injection during the week. With a 9 percent deficit, the area is also the closest to the five-year norm. Over the last several years, supply concerns have created considerable price fluctuation in the area during peak summer demand seasons. Ample supplies for the approaching summer, on the other hand, may keep that in control this year.

According to statistics from S&P Global Commodity Insights, SoCal Gas demand remains unchanged from last winter at 2.8 Bcf/d. Receipts, on the other hand, have increased by around 120 MMcf/d from winter to winter, reaching 2.7 Bcf/d. Stronger revenues and stable demand during the winter enabled injections to average 62 MMcf/d, down from over 100 MMcf/d from the previous winter. By March 11, when inventories had fallen to 71 Bcf, year-over-year increases had risen to 17 Bcf.
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Since March 11, the area has only received net injections, implying that the 71 Bcf on March 11 is the season's low. SoCal inventories hit a low of 52 Bcf on March 27 last year. To meet its 92 Bcf capacity by November 1, the area would require to average injections of 90 MMcf/d, which is 30 MMcf/d lower than last year. Injections have averaged 151 MMcf/d since March 11th. If current trends continue, SoCal inventories might be full by late July. Throughout the summer, high stockpiles and faster-than-normal injection rates could enhance negative risk to SoCal city-gate.

Following the publication of the EIA's storage data on March 24, the NYMEX Henry Hub April contract jumped 15 cents to $5.37/MMBtu. The summer strip, which runs from April through October, increased 14 cents to $5.46/MMBtu. From November through March in 2022-23, the winter strip increased by 12 cents to $5.53/MMBtu. Over the last week, Henry Hub futures have risen substantially across the board.

According to S&P Global, a 50 Bcf injection is expected for the week ending March 25. This would be a significant deviation from the week's average withdrawal of 23 Bcf.