The EIA announced a 49 Bcf withdrawal for the week ended Dec. 30. The draw was significantly below market expectations and lower than any available forecast. The market was expecting a draw of 82 Bcf with the full range of forecasts ahead of the release -61 to -135. The 49 Bcf draw is also lower than the 98 Bcf draw reported last year and the 5-year average of 107 Bcf.

The smaller-than-expected storage withdrawal took prices down further, 6-7 cents this morning after declines that started last week. During the past week, February contract has lost about 70 cents, from about $3.90 per MMBtu on Dec. 28 to $3.20 this morning as weather forecasts are trending warmer overall.
Working gas storage inventories dropped to 3.311 Tcf, level 21 Bcf below the 5-year average and 364 Bcf below last year and 5-year high. See Drillinginfo EIA’s chart below.

Next week’s storage report is expected to be another strong withdrawal of 3 digit as cold temperatures returned this week. Market players are focused now on the longer trend and with the cold fading prices have been under pressure.

From a fundamentals perspective:
– Production levels remain low. The year 2016 didn’t see any growth in production for the first time in many years and current levels are showing no sign of that changing. Prices are also not high enough to incentivize significant drilling.

– Demand has been extremely volatile this winter so far with record high and low withdrawals and the market is struggling to get a clean pi...