What’s the important chart for US natural gas?

US natural gas prices jumped 2.5% today after a surprisingly large draw in weekly inventory data. The 190 bcf drawdown compared to the average of the week of 66 bcf.

This the top chart on most natural gas decks as it shows natural gas storage relative to the past five years. As you can see, it’s still well-above the the five-year average.

What that doesn’t show — and what this week’s draw highlights — is that the US is using more natural gas than ever due to LNG exports and a big increase in power burn as natty replaces coal.

I think the right chart to look at is days of storage relative to demand, and it paints a much different picture with inventories 5% below average.

Now the latest forecast show improving weather in the coming week and mild Christmas weather beyond that (except in the southeast) so that’s what is going to matter in the short term. US shale is also growing increasingly gassy and there are ample supplies. Still, we should see a firming of gas prices in the longer term with prices stabilizing above $3.

This article was written by Adam Button at www.forexlive.com.