Natural Gas: Was That Another Dead Cat Bounce?

,International foreign exchange trader platform one thing’s for sure: The winter of 2022/23 won’t easily be forgotten.

than initially thought.Source: Gelber & Associates

Storage of gas stood at a total of 2.114 tcf, or trillion cubic feet, as of Feb. 24 — up 27% from the year-ago level of 1.66 tcf and 19% higher than the five-year average of 1.77 tcf, the EIA, or Energy Information Administration, reported.

In response to the warmth and lackluster storage draws, gas prices plunged from a 14-year high of $10 per mmBtu in August, reaching $7 in December before hitting a 2½-year bottom of $1.967 in late February.

Since then, the market has rebounded on an anticipated rise in U.S. heating demand over the next two weeks from colder-than-normal weather conditions. Daily production of gas has also fallen to below January highs of above 100 bcf, or billion cubic feet, per day.

Another upside for gas bulls had been the improving feed demand for liquefied natural gas, with the steady pickup in volumes going into the Freeport LNG terminal in Texas. The plant has been slowly getting back to normal operations after a fire in June. Freeport had been a rock-solid base of 2 bcf, or billion cubic feet, of gas demand a day until it was knocked out.

Notwithstanding these bullish elements, weather shifts since late Monday pointed to even less heating demand in the winter twilight that would put more pressure on storage.

Said EBW senior energy analyst Eli Rubin in comments carried by naturalgasintel.com:

“Simply put, for current surpluses of 350 Bcf to be erased or meaningfully reduced, it will take a prolonged period of stronger-than-normal temperature driven demand, as well as a much tighter balance.”

Ahead of Thursday’s storage update from the EIA, or Energy Information Administration, for the week ended Mar. 3, analysts tracked by are calling for a draw of just around 80 bcf for heating and power generation purposes.

That would be smaller than the 126 bcf consumption during the same week a year ago and the five-year (2018-2022) average decline of 101 bcf. During the prior week to Feb. 24, utilities pulled 81 bcf of gas from storage for heating and power generation.

If correct, the forecast for the week ended Mar. 3 would cut stockpiles to 2.034 tcf, leaving stockpiles about 32% higher than a year ago and 22% above the five-year average. There were around 135 HDDs, or heating degree days, last week, which was less than the 30-year average of 156 HDDs for the period, according to data provider Reuters-associated data provider Refinitiv.

HDDs measure the number of degrees a day’s average temperature is below 65 degrees Fahrenheit (18 degrees Celsius) to estimate demand to heat homes and businesses.

Disclaimer: Barani Krishnan uses a range of views outside his own to bring diversity to his analysis of any market. For neutrality, he sometimes presents contrarian views and market variables. He does not hold positions in the commodities and securities he writes about. 

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