NATURAL GAS INVENTORY (Week Ended 2/20/15)roundup2

Current: 1,938 Bcf

Actual Injection/(Withdrawal): (219) Bcf

Economist Average Estimate: (241) Bcf

Previous: 2,157 Bcf

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CIBC World Markets

The EIA revealed a much smaller than expected draw of -219 Bcf relative to market expectations of -241 Bcf. The draw was 7 Bcf softer than even the most bearish of the analyst estimates on Bloomberg. In other words, today’s number was not just soft relative to consensus, but it was much more bearish than what anyone was expecting. The release triggered a sharp push lower in the front end of the curve back towards the $2.70/MMBtu range.

Despite the miss to the downside, a 200 Bcf draw in any particular week is large and has only happened in 14 other weeks over the past five years. Residential/Commercial demand spiked to nearly 65 Bcf/d last week (+20 Bcf/d WoW), which is the largest weekly average seen in at least the past 10 years. Relatively strong production, coupled with an increase in LNG and imports from Canada helped to cushion the jump in demand.

This month will wind up being the coldest February in at least the past 10 years (providing that HDDs clock in as forecasted for the next couple of days). Gas weighted HDD seen this month will finish more than 8% higher than last year’s polar vortex plagued February.

The inability to stage a sustained rally above the $3/MMBtu mark, despite the cold, is telling. The difference between this year and last is that current inventories are relatively in line with historical averages and 576 Bcf higher above last year’s levels. YoY production is also more than 11% higher so far this month. Despite the colder month this time around, freeze offs seen last February were almost double what we’ve seen on a month to date basis, mainly because we saw larger freeze offs from the Louisiana and Texas regions last year.

Prices will wax and wane with the weather as forecasts are suggesting widespread cold through the first two weeks of March, but the downward trend will likely remain intact as weather fades and the focus shifts to a looser market come the summer.

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