The Energy Information Administration (EIA) reported yesterday that 127 BCF of gas was withdrawn from storage last week, compared to the market expectation of a 119 BCF withdrawal. As a result, natural gas futures rallied Thursday— up 5.9 percent—and prices continue to edge higher today.
The withdrawal rate was well below last year’s 230-bcf draw in storage for the same week, and less than the 178-bcf five-year average draw for the week. The storage surplus grew to 42 percent above a year earlier, compared with 33 percent in the previous week. Total storage now stands at 2.761 TCF.
March-delivery natural gas on Nymex was 3 percent, or 7.7 cents, higher at $2.644 per million British thermal units. The price hit an intraday high of $2.694/mmBtu, the highest since Jan. 30.
If prices can hold gains through the settlement, this will mark the first back-to-back increase since a four-day rally Jan. 20-25.
Volatile swings have been the rule for the gas market, which was battered to 10-year lows last month on persistent above-normal temperatures sapping residential heating demand and surging output. The combination resulted in gas companies pulling down less from storage in what is normally a strong demand period.
The current glut partly stems from the U.S. energy industry’s success with new exploration techniques—notably hydraulic fracturing of shale formations, or fracking. Shale formations full of gas keep turning up across the country, storage reservoirs are close to full and companies are now starting to try to export the excess gas.
Many experts predict rock-bottom natural-gas prices through at least 2013. That is good news for consumers. More than half of American households use gas to heat their homes, and they can expect an 18% drop in the cost of staying warm this winter, according to federal forecasts.
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