US natural gas inventories decreased by 11 Bcf for the week ending March 12, compared with the five-year (2016–2020) average net withdrawal of 59 Bcf. Working gas stocks total 1,782 Bcf, which are 93 Bcf lower than the five-year average and 253 Bcf lower than last year at this time. Analysts’ expectations had been for a withdrawal of 17 Bcf. There are likely only two remaining small withdrawals left in the heating season, leaving storage bottom out around 1.7 Tcf.
Soon the market will look to see how strong early injections are, which may tell the story of how much gas can be put back into storage.
Quietly, LNG prices in APAC have increased and US producers are certain to maximize exports to the region in coming weeks. Daily production of LNG feed gas hit a new daily high at 11.65 Bcf/day this week largely in response to higher demands coming from Japan.
Weather will continue to provide short and near-term volatility, especially if there is early heat causing cooling demand in major consuming areas. Weather forecasters are calling for an above-average summer, so strong early injections are critical to replenishing storage. Expect prompt month pricing to flex this week as traders adjust their positions prior to April contract expiration.
End users with exposure to natural gas prices for the next few years need to practice diligent and prudent risk management. With exceptional value currently seen in the deferred years, end-users need to be FORWARD thinking to manage their long- term risk exposure to the natural gas market.
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