Market Shrugs Off Historic Storage Draw
Natural gas prices ended the February 5 trading session lower, as markets largely ignored a historic drawdown in U.S. storage levels.
On the New York Mercantile Exchange, natural gas futures dropped more than 2% to settle at $3.39 per million British thermal units (MMBtu). Despite a record-breaking withdrawal from storage, bearish sentiment continued to dominate the energy market.
Weekly Loss Builds After January Rally
Prices are now heading toward a weekly decline of nearly 10%, giving back a portion of last month’s sharp rally that was driven by an intense winter storm across much of the United States.
Even the largest storage pull on record failed to provide lasting price support.
EIA Reports Largest Withdrawal on Record
According to data released by the U.S. Energy Information Administration (EIA) on February 5, energy companies withdrew 360 billion cubic feet (bcf) of natural gas from storage for the week ending January 30. This marked the largest weekly withdrawal ever recorded, narrowly surpassing the previous record of 359 bcf set in January 2018.
Inventory Levels Remain Near Seasonal Norms
Following the drawdown, total U.S. natural gas inventories fell to 2.463 trillion cubic feet, about 2% higher than the same period last year, but 1% below the five-year average of 2.49 trillion cubic feet.
The decline in inventories was widespread, with the South-Central region accounting for a significant 159 bcf reduction in supplies.
However, prices weakened because the withdrawal came in slightly below market expectations, which had called for a draw of around 374 bcf. In addition, traders had likely already priced in the bullish storage data during January’s 100% price surge, limiting any upside reaction.
Looking ahead, natural gas prices may struggle to find a fresh catalyst.
As Arctic conditions ease and snowfall and ice retreat, energy producers are gradually restoring operations. U.S. natural gas production is expected to rebound to approximately 106.4 bcf per day, while liquefied natural gas (LNG) exports are averaging more than 18 bcf per day, according to Phil Flynn, energy strategist at The PRICE Futures Group.
“At the same time, some in the natural gas industry worry that even with this record-breaking withdrawal, production could quickly return to record highs and cap prices unless cold weather returns,” Flynn noted in a February 5 commentary.
Weather forecasts may add further pressure. AccuWeather predicts warmer-than-normal temperatures across much of the Central and Eastern United States over the coming week. Milder conditions could reduce home heating demand and lead to smaller storage withdrawals, keeping natural gas prices under pressure.
