US Natural Gas Demand Light with Warm Weather, EIA Report to Show Large Withdrawal

Key Takeaways

• NatGasWeather predicts that today’s EIA storage report could be a source of volatility, with survey averages suggesting a draw of -71-76 Bcf, larger than the 5-year average of -45 Bcf.
• Natural Gas Intelligence (NGI) also forecasts a larger-than-average withdrawal for the week ending March 17, with withdrawal estimates ranging from 66 Bcf to 81 Bcf.
• As of March 10, the total Lower 48 working gas in underground storage was 1,972 Bcf, which is a surplus of 378 Bcf (23.7%) to the five-year average.

Overview

Natural gas futures are trading slightly better ahead of today’s weekly government storage report, due to be released at 14:30 GMT. The price action is subdued, however, with the current inside move suggesting investor indecision and impending volatility.

At 13:45 GMT, May natural gas futures are trading $2.371, up $0.064 or +2.77%. The United States Natual Gas Fund ETF (UNG) is at $7.52, up $0.14 or +1.83%.

Short-Term Weather Outlook

According to NatGasWeather for March 23-29, “National demand will be light today as warm high pressure rules much of the southern and eastern US with highs of 50s to 80s.

Cooler than normal weather systems will track across the western, central, and far northern US this weekend and next week with lows of 10s to 30s and highs of 30s to 50s for moderate national demand, but not strong with the southern US remaining comfortable with highs of 60s to 80s.

Energy Information Administration Weekly Storage Report

NatGasWeather believes today’s EIA storage report could be the source of volatility, where survey averages suggest a draw of -71-76 Bcf, larger than the 5-year average of -45 Bcf. It was cooler than normal over most of the northern 2/3 of the US, while warmer than normal over the southern tier. Their analysts expect a draw of -76 Bcf, and if close will improve surpluses to +348 Bcf.

Natural Gas Intelligence (NGI) is also forecasting that the EIA report is “poised to reveal a larger-than-average withdrawal for the week ending March 17.”

According to NGI, “Withdrawal estimates submitted to Reuters ranged from 66 Bcf to 81 Bcf, with a median of 76 Bcf. Bloomberg’s poll showed the same range and landed at a median of 73 Bcf. The Wall Street Journal found an average expected pull of 75 Bcf. NGI modeled a 76 Bcf withdrawal.”

Compared to a pull of 55 Bcf from the previous year and a five-year average decline of 45 Bcf, the estimates are in line.

EIA Report Anticipated to Signal Inflection Point for Market

According to EIA, as of March 10, the total Lower 48 working gas in underground storage was 1,972 Bcf, which is a surplus of 378 Bcf (23.7%) to the five-year average. Throughout the winter heating season, there has been a dominant trend of lighter-than-average storage withdrawals, causing the surplus to the five-year average to increase.

On Thursday, EBW Analytics Group informed clients that it expected a bullish-leaning result, in contrast to the consensus estimates for a withdrawal in the low to mid 70s Bcf. However, if the draw is smaller than anticipated, there may be bearish price risks, as it could provide ammunition to crack key technical support near $2.12, according to EBW analyst Eli Rubin. Today’s EIA report will mark a long-awaited inflection point as storage surpluses begin to trend lower into mid-April.