Natural Gas: Weekly Storage Analysis

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Natural gas inventories declined by 85 bcf for the week ended Feb 25. This was in-line with market expectations and compares to a draw of 81 bcf last week. The same period last year saw a decline of 124 bcf. The 5-year average is -130 bcf.

As a result, the storage deficit vs. both last year and the 5-year average narrowed.

Total working gas in storage now stands at 1,745 bcf, only 9 bcf less than last year, and 15 bcf below the 5-year average.

With storage levels sitting right near the 5-year average, there remains ample storage to meet current demand. And production continues to be strong, more than offsetting any weather-related demand.

Currently, many forecasters are calling for a colder-than-normal spring. However if the cool weather fails to spur additional heating demand, or if the cool weather does not materialize as expected, there is risk of excess supply pushing spot prices even lower.

As I stated in last week's post, Natural Gas: Weekly Storage Analysis and More, there are many reasons to be bullish at some point between now and late spring. But now does not appear to be the time.

Technically, natural gas posted an evening star reversal last week following the bounce off the 3.80 level. Spot prices now look poised to test the 3.50 level.