US natural gas inventories decreased by 237 Bcf for the week ending February 12, compared with the five-year (2016–2020) average net withdrawal of 136 Bcf. Working gas stocks total 2,281 Bcf, which are 57 Bcf higher than the five-year average and 105 Bcf lower than last year at this time. Analysts’ expectations had been for a withdrawal of 257 Bcf. The weekly withdrawal wasn’t all that surprising to the market. Based on known demand data, week ending 2/12 was going to show the highest gas withdrawal of the season easily. In fact, this week’s report probably pales in comparison to the anticipation that the market will have for next week’s report covering the week ending 2/19. What a crazy week it has been. To kick start things, extremely cold weather began to set-in right before the long holiday weekend. Traders were buying for a four-day package (Sat-Tues). On Friday, it was clear that this wasn’t going to be any ordinary cold outbreak. This instead had the makings of a “100-year storm” like feel. Gas utilities and pipeline operators across the Midcontinent and Midwest regions began issuing curtailments and operational flow orders (OFOs).
Daily natural gas production took a nosedive from an average of over 92 BCF/day to 70 BCF/day due to well freeze-offs and various pipeline constraints. The wholesale electricity grid operator in Texas, ERCOT, issued rolling blackout orders as available electric generators couldn’t operate. Gas generators couldn’t the gas need to run plants and wind generators saw frozen blades and couldn’t operate.
About 40% of available electric generation in Texas was offline at some point this week.
With record settings cold temperatures seen hitting all over the region, spot/cash prices for both natural gas and electricity also soared to record highs. Daily values of gas at the benchmark trading hub in Oklahoma topped $1,000/DTH this week. Hourly power prices in ERCOT hit established price caps of $9,000/MWh. The governor of Texas issued an order prohibiting the export of gas supply over state lines. Crazy is probably an understatement to describe this week. But, by next week, a significant warm-up is seen. Frozen gas wells should start flowing again and daily gas production should start to rise.
Power generation in Texas and other Midcon states should come back on-line. Industrial end-users, who had been forced offline to allow gas supply to try and meet humanitarian needs, should start ramping back up. Analysts are trying to predict what next week’s storage withdrawal might look like.....good luck with that. It will probably be +/- 300 BCF but there are way too many variables to analyze right now. NYMEX March futures saw a lot of excitement this week and pushed to a $3.31 high. But, March weather won’t have the same bite to it as what we just saw and the contract will probably retrace before expiring next week. What won’t go away quite so fast is the alarming end of season storage inventory level that this market is facing.
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