Last week futures prices for the front natural gas contract jumped almost 5% on the news of an emerging cold front blanketing the Northern half of the U.S. toward the end of the month. Previous forecasts had indicated that the
current spell of below-average temperatures would likely be short lived and most of the U.S. would be back to above-average temperatures by mid-month. While storage inventory levels are now back above the five-year average following a weak withdrawal reported on the last EIA storage report for year 2021, ending inventory balances continue to be of concern for many investors. The threat of increased weather related demand combined with reduced
daily production caused by well freeze-offs in Texas have many wondering how much impact that a “normal” February, a month with historically strong storage withdrawals, will have on inventories. A colder outlook for near-term weather could be the support necessary to keep February’s prices at or above $4 for the next 7-10 days but could lose momentum if February shows signs of unseasonable warmth. The February 2022 will expire on Thursday, January 27th.
EIA Storage Report
For the week ending 31 Dec 2021, the EIA reported a withdrawal of 31 Bcf from storage. Natural gas inventories now total 3,195 Bcf, which is a deficit of 154 Bcf to last year but 96 Bcf above the five-year average. Bloomberg data
shows an average of 98.5 Bcf/d in daily dry production for the reporting period which was an improvement of 1.4 Bcf from the week prior. Total withdrawals for the month were the weakest since 2018, totaling only 281 Bcf due to
unseasonably warm temperatures softening end-user heating demand. The first week of January has provided the first real glimpse of winter with below-average temperatures. For the week ending 7 January 2022, NUS's models show an estimated 220-230 Bcf withdrawn from storage.
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