EIA reports first US natural gas storage draw this season

10 December 2009 18:12  [Source: ICIS news]

HOUSTON (ICIS news)--US natural gas storage levels recorded a draw for the first time this winter season, the US Energy Information Administration (EIA) said on Thursday, based largely on a rebound in industrial demand and a jump in electricity use.

Total natural gas in underground storage fell by 64bn cubic feet (bcf) to 3,773 bcf in the week ended 4 December.

"It's obviously very encouraging to finally withdraw some gas and withdrew more than that people thought," said Cameron Horwitz, an analyst with the investment bank SunTrust Robinson Humphrey in Houston.

The average market prediction put last week's draw at 47bcf and the larger delivery number prompted a spike in futures prices.

At 12:18 New York time (17:18 GMT), January natural gas contracts on the NYMEX were up by 35.9 cents, trading at $5.257/MMBtu.

Horwitz pinned the larger-than-expected draw on a rebound in industrial need for natural gas following a holiday-shortened week.

"The Thanksgiving holiday suppressed some industrial demand," he said. "There was a pretty good bounce up of industrial levels. That's encouraging for the gas market because that has been a very weak spot for the market."

Energy analyst Stephen Schork attributed some of the bump in natural gas need to the substantial deliveries seen in the EIA data.

"Electricity load jumped 8.5% as households flicked on their Christmas lights. Power output came in at 74,442 gigawatt hours," Schork wrote in his newsletter The Schork Report. "That was the largest amount of electrons transmitted since September."

A blast of winter weather has recently hit the heavy heat-consuming areas in the US midwest and northeast, and Schork and Horwitz said winter forecasts will start to play into coming reports.

"In light of this week’s weather, today’s report is a non-event," Schork said. "All eyes are already looking ahead to next Thursday’s report. The normal delivery for that report ranges in between 106 and 135 bcf."

Horwitz predicted draws between 150-175 bcf in the next two EIA reports, which would help push prices up.

"It definitely supports (upward prices) to burn off 300 bs in two weeks," he explained. "That's a pretty good chunk. It's not screamingly bullish for (long-term) fundamentals, but in the near term it should support."

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By: Ryan Hickman
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