EIA: Storage Near All-Time Low
The amount of working gas in storage at the end of the winter
heating season (March 31) will be at a record low, according to a
new report by the Energy Information Administration (EIA). In fact,
some operators may be forced to dip into their base gas inventories
to maintain facilities.
"Regardless of how the rest of the 2000-2001 heating season
plays out, remaining working gas inventories on March 31, 2001 are
likely to approach record lows and remain at low levels through the
first several months of the refill season," the Department of
Energy (DOE) agency said in a report on the current status and
near-term outlook for storage inventories in the United States.
Specifically, the EIA predicts storage stocks of working gas
would drop to 624 Bcf by the end of this month, assuming
withdrawals continue at the average rate of the past five heating
seasons. But if withdrawals are higher than average, they could
fall to as low as 461 Bcf, it warns.
The American Gas Association (AGA) last Wednesday reported that
73 Bcf of working gas was withdrawn for the week ending March 2,
which places the current level of working gas stocks nationwide at
approximately 785 Bcf.
The historical low for working gas storage was recorded at the
end of the 1995-96 heating season. The EIA reported at the time
that U.S. gas stocks fell to 758 Bcf, while the AGA put the level
even lower - at 546 Bcf.
"Even with higher-than-average withdrawal rates through the rest
of [this] heating season, storage stocks are expected to be
adequate to meet demand," the agency noted in its report. However,
this prognosis does not take into the account the cold weather and
snowstorms that gripped the Northeast and New England regions last
On a regional basis, the EIA predicts the 280 storage sites
located in the Eastern Consuming Region will have a total of 351
Bcf in inventory by the end of March, which is 225 Bcf less than
the region's five-year average stock level; the Western Consuming
Region (37 sites) will end the season with about 76 Bcf, or 126 Bcf
below average; and the Producing Region (98 storage sites) will
have 197 Bcf remaining, or 164 Bcf below its five-year average. The
estimates assume March withdrawals from storage will be on par with
the five-year average rate.
The remaining gas stocks in the Eastern Consuming and Producing
Regions at the end of March will be near the record low levels set
at the end of the 1995-96 heating season, the EIA said. The gas
storage levels in the West already are below the record low of 151
Despite the bleak numbers, "there is little likelihood that
working gas levels for the regions will be completely drawn down"
at the end of March, the agency said. "Nevertheless, working gas
inventories at some sites could drop so far that operators would
need to dip into base gas inventories to maintain operations."
It estimates the industry will have to inject about 10 Bcf/d for
214 days to refill storage levels sufficiently for the next winter
heating season. This compares to an injection rate of 7.6 Bcf/d for
the same period last year.
As operators scrape the bottom of their storage facilities to
satisfy high demand, the EIA predicts there will be intensified
competition during the upcoming April-October period between gas
supply for storage injections and gas to satisfy baseload
consumption. This will put upward pressure on prices, which, in
turn, could result in less gas going into storage for next winter,
the agency cautioned.
"The heavy demand for natural gas to refill depleted storage
inventories between April and October 2001 will vie with baseload
requirements to a greater degree than in previous years. Hot
weather and renewed economic strength would both add to demand.
This heightened competition for supplies should place some upward
pressure on price levels," which in the end "could dampen refill
activity" for the winter heating season of 2001-2002, the EIA said.
Although gas prices have been moderating, the EIA anticipates
that prices during the 2001 storage refill season will exceed the
average price level of the 2000 refill season.
While the upcoming refill period "could resemble that of last
year's" in many respects, the agency noted "several favorable
factors" could improve the situation: increased U.S. gas
production, more Canadian gas imports, a decline in prices from the
peak levels in early 2001, and decreased demand by industrial gas
users due to higher prices.