Natural Gas Forecast: EIA Expected to Report Larger-Than-Average Withdrawal from Storage

Highlights

• EIA storage report expected to show larger-than-average withdrawal
• Storage surplus expected to decrease to five-year average but could increase in mid-April
• Tighter supply/demand balance and bullish weather needed to erase storage cushion

Overview

Natural gas futures are edging lower on Thursday, shortly before the release of the latest government storage report at 14:30 GMT. In the meantime, prices continue to consolidate inside a relatively tight trading range at the start of the shoulder season.

At 13:00 GMT, May natural gas futures are trading $2.121, down $0.034 or -1.56%. On Wednesday, the United States Natural Gas Fund ETF (UNG) settled at $6.80, up $0.19 or +2.80%.

Freeport LNG Plant Receives Slightly Lower Gas Flows but Still Above Export Capacity

On Wednesday, Freeport LNG’s export plant is expected to receive 2.2 billion cubic feet per day (bcfd) of gas. This is slightly down from 2.3 bcfd on Monday and Tuesday, after shutting down in June 2022 due to a fire.

However, this is still above the 2.1 bcfd of gas that Freeport LNG can convert into LNG for export, as LNG plants use some of the fuel to power equipment for LNG production.

The average gas flows to all seven major U.S. LNG export plants have increased to 13.9 bcfd so far in April, up from a record 13.2 bcfd in March, and these plants can convert approximately 13.8 bcfd of gas into LNG.

EIA Expected to Report Larger-Than-Average Natural Gas Withdrawal from Storage

Market analysts expect the Energy Information Administration’s (EIA) storage report to show a larger-than-average late-season withdrawal of natural gas from storage, with projections for a low-20s Bcf withdrawal for the week ending March 31st.

Bloomberg’s poll estimates withdrawals between 18 and 24 Bcf, while Reuters’ survey estimates range from 10 to 28 Bcf. NGI models predict a 22 Bcf withdrawal, matching the Wall Street Journal’s average.

Weather Data Remained Exceptionally Bearish

NatGasWeather reported that temperatures during the EIA report period were colder than usual in the western, central, and northern US, while East Texas, the South, and Southeast experienced warmer weather.

They predicted a bullish draw of 28-29 Bcf, aided by lighter wind energy generation. Overnight forecast trends showed a slight adjustment towards colder weather following recent warmer trends.

According to exceptionally bearish weather data for early next week through April 19, forecasters expect comfortable temperatures in the 60s to 80s to cover the majority of the US, which will result in larger than normal builds.

Short-Term Outlook

According to NatGasWeather, the upcoming EIA report is expected to decrease the storage surplus to the five-year average and bring it close to 300 Bcf.

However, the surplus is expected to increase to the 350-375 Bcf range. This is due to warm temperatures and mild weather-driven demand in mid-April.

The report highlights that the background state is quite bearish. And it would require a much tighter supply/demand balance, combined with bullish weather to erase the storage cushion. The surplus could potentially increase to 400 Bcf if the weather trends remain the same.