Surprise Depletion of Natural Gas Reserves

• There was a 140 billion cubic feet reduction in working gas in storage compared to the previous week.
• The inventory draw was more than what analysts had expected, potentially bolstering natural gas prices.
• The dynamics of weather forecasts will continue to be the primary factor influencing natural gas markets.

On January 11, 2024, the EIA published its Weekly Natural Gas Storage report, revealing a 140 Bcf decrease in working gas in storage from the previous week, surpassing the analyst consensus of -119 Bcf.

Currently, stocks are 436 Bcf higher than the previous year and 348 Bcf above the five-year average of 2,988.

The larger-than-anticipated draw may offer added support to natural gas prices, which are striving to recover from the decline seen yesterday.

Traders will keep a close watch on developments in weather forecasts. The current outlook suggests cold weather until January 21, with the potential for warmer temperatures toward the end of the month.

Looking at the futures curve, the March contract settled near the $2.60 level, $0.5 lower than the front-month February contract. This presents a potentially precarious situation for the bulls, indicating that the continuation of the current rally will hinge on near-term catalysts.

From a technical perspective, natural gas is aiming to establish a foothold above the $3.10 level following the release of the optimistic EIA report. It remains to be seen whether natural gas will be able to gather further upward momentum as traders also keep an eye on weather forecasts.