Natural gas prices escalated Jan. 22 on the New York futures market and also on spot markets with the return of cold weather in the Eastern US and forecasts of freezing temperatures and sleet reaching into deep Texas by Jan. 24. Crude oil prices also jumped by more than $1/bbl.
Analysts said unusually cold winter would prompt high gas demand for residential and commercial heating, which likely would tighten stored gas supplies. A previous Arctic blast had already lowered gas storage levels. This week, more than 1 ft of snow fell in parts of the Northeast.
The US Energy Information Administration reported working gas in underground storage was 2.423 tcf for the week ended Jan. 17, a net decline of 107 bcf from the previous week’s estimate. Stocks were 598 bcf less than last year at this time and 369 bcf below the 5-year average of 2.792 tcf.
Analysts have said gas storage levels by March could sink to levels not seen since 2008, and that US gas producers should expect to be called upon to replace supplies.
PIRA Energy Group of New York in October forecast a Jan. 31 year-on-year US gas storage deficit of about 100 bcf, but PIRA has revised its estimate, now saying cold weather could trigger a 600 bcf deficit.
“Canadian exports have been inflated to help meet higher-than-expected US demand,” PIRA said, adding that Canada’s own storage deficit could limit post-March shipments to the US.
“As a result, incremental year-on-year US production looks burdened to assume a very heavy load in narrowing US storage deficits before the next heating season,” PIRA said in a Jan. 23 research note.
US crude inventory increases
Regard crude oil inventories, the EIA’s weekly report on Jan. 23 showed an increase of 1 million bbl for the week ended Jan. 17 compared with the week ended Jan. 10.
US commercial crude oil inventories, excluding the Strategic Petroleum Reserve, were estimated at 351.2 million bbl, which was in the upper half of the average range for this time of year.
Total motor gasoline inventories increased by 2.1 million bbl, and are well above the upper limit of the average range. EIA noted that finished gasoline inventories decreased while blending components inventories increased last week.
Distillate fuel inventories decreased by 3.2 million bbl and are well below the lower limit of the average range for this time of year. Propane-propylene inventories fell 3.4 million bbl last week and are well below the lower limit of the average range.
US refinery inputs averaged over 15.2 million b/d for the week ended Jan. 17, which was 515,000 b/d lower than the previous week’s average. Refineries operated at 86.5% of capacity.
Gasoline production increased last week, averaging 8.5 million b/d. Distillate fuel production decreased, averaging 4.5 million b/d, EIA said. US crude oil imports averaged over 7.5 million b/d, which was up by 655,000 b/d from the previous week.
Over the last 4 weeks, crude oil imports averaged 7.5 million b/d, 4.2% below the same 4-week period last year. Total motor gasoline imports, including both finished gasoline and gasoline blending components, averaged 528,000 b/d last week. Distillate fuel imports averaged 191,000 b/d last week.
Heating oil for February delivery was up 2.3¢ to a rounded $3.04/gal. Reformulated gasoline stock for oxygenate blending for February delivery was up 5.6¢ to reach a rounded $2.68/gal.
The February natural gas contract on NYMEX was up 25.8¢ to a rounded $4.69/MMbtu. On the US spot market, the gas price at Henry Hub was $4.88/MMbtu, a 30.8¢ increase.
In London, the March ICE contract for Brent crude delivery rose $1.54 to close at $108.27/bbl in Jan. 22 trading while the April contract climbed $1.46 to $107.51/bbl. The ICE gas oil contract for February was unchanged at $919/tonne on Jan. 22.
The Organizational of Petroleum Exporting Countries reported its basket of 12 benchmark crudes was $105.62/bbl on Jan. 22, up 36¢.
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