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Chill Factor: U.S. Records Third-Highest Natural Withdrawal Amid Arctic Freeze

The U.S. had a record third-largest natural gas storage draw of 326 Bcf during a recent deep freeze, impacting energy markets and production.

The withdrawal follows the two largest in recent years: 359 Bcf in January 2018 and 338 Bcf in February 2021, the week of Winter Storm Uri, according to EIA records that date back to 2010.

Amid a severe cold snap last week, the U.S. experienced a significant spike in natural gas demand, leading to a record withdrawal from storage. The U.S. Energy Information Administration (EIA) reported that utilities withdrew a massive 326 billion cubic feet (Bcf) of natural gas from storage for the week ending January 19, marking the third-highest withdrawal on record. This substantial drawdown was driven by extreme cold weather that heightened gas demand to a daily record high and simultaneously reduced both gas production and liquefied natural gas (LNG) feedgas to a one-year low.

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The scale of this withdrawal is underscored by its comparison to historical figures. It exceeded the typical withdrawal for this time of year, which has a five-year (2019-2023) average decline of 148 Bcf. The only instances of higher withdrawal in the past were during the brutal freeze in February 2021, with a 338 Bcf withdrawal, and the all-time record withdrawal of 359 Bcf in January 2018.

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Despite this significant draw from storage, natural gas futures remained relatively steady, showing only a slight price decrease. This stability in pricing, despite the large withdrawal, could be attributed to robust natural gas production which had set a new production record in December at 105.5 Bcf/day. However, the overall output in the Lower 48 states for January was reported to be down from the record levels seen in December, primarily due to the freeze-offs and other weather-related disruptions.

Meteorologists predict that the weather in the Lower 48 states will remain warmer than normal through early February, which may lead to a decrease in gas demand. This forecast, along with the recent recovery in dry gas production following the Arctic freeze, suggests little support for a significant rise in Henry Hub gas prices in the coming weeks.

In summary, the U.S. natural gas market experienced a dramatic week with one of the largest storage withdrawals on record due to extremely cold weather, yet prices remained relatively stable due to strong production and a warmer weather forecast for the near future​​​​​​​.

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