In a move that could have a near-term bearish impact on thenatural gas market, the American Gas Association has decided torelease a five-year average of gas storage levels in its weeklystorage report. With current storage levels significantly behindlevels last year, the decision to publish an average that is muchlower than levels last year will give the market a much differentview of industry fundamentals.

The director of the AGA’s storage report said yesterday in aninterview with NGI that the report has been giving the market anincomplete picture by showing only a year-on-year comparison ofworking gas levels. AGA is publishing the five-year average “justto give people a little more information,” said AGA’s Chris McGill,director of gas supply and storage. “Last year there was anabnormally high level of working gas in storage compared toprevious years and our information that we were publishing on ourreport essentially invited that comparison and really only thatcomparison. We’re hundreds of Bcf behind the working gas levels oflast year. However, we are significantly less than that behind, forexample, the prior five-year average.”

Gas prices are at record highs and low storage levels,particularly when compared with last year’s levels, have beenpartly to blame, according to many market observers. Futures andcash traders often focus intently on the comparison between thisyear’s and last year’s levels and make their decisions accordingly.

The most recent report by the AGA, which has been revised withthe new five-year average, shows working gas levels as of June 30were 466 Bcf less than levels at the same time last year. However,they were only 168 Bcf less than the five-year average on thatdate.

AGA could have given the market a six-year average because itsdata go back that far, but McGill said the five-year average wasmore representative of changes in storage usage.

A six-year average also would have shown a larger deficit ofminus 251 Bcf.

“I think there is some question as to whether even a five-yearaverage is truly representative for a comparison basis, as quicklyas storage is changing and utilization of storage is changing. Fiveyears is just what I pulled out of the hat, really. Maybe threeyears would be even better. I’m not sure. Five is what I settledon,” McGill said.

Contrary to what some observers, including Sen. Charles Schumer,have indicated, the industry is not headed for an energy crisisthis winter, and the new average shows that quite well, said McGill(see Daily GPI, July 11). “With respect to natural gas, if all youare looking at is storage, we are certainly behind last year andeven about 10% behind the five-year average, but I don’t see thatas a crisis. Last week (the week ending June 30) we had as much gasgoing into storage as we had the year before. We certainly stillhave a long time in the storage refill season. We’ve had netrefills in storage even in December of certain years. On thestorage side of things, I don’t see a huge problem. I don’t knowhow much working gas is going to be in storage at the beginning ofthe winter heating season whether it’s 2.7 Tcf or 2.9 Tcf. I knowthat the local distribution companies and other companies that putgas in storage for firm customers are going to have it there.”

McGill noted that in 1996 working gas levels were lower thanthey are currently and gas in storage still reached more than 2.7Tcf by November. For the week ending June 30, 1996, the AGAreported there was 1,433 Bcf of working gas in storage — comparedto the current level of 1,636 Bcf. Working gas injections that yearaveraged 76 Bcf/week until storage reached a seasonal high of 2,725Bcf by the week ending Oct. 27. If the industry achieves a similarinjection pace this year, working gas levels would be 2,928 Bcf bythe week ending Oct. 27, which is only a few Bcf below the six-yearaverage and slightly more than the five-year average.

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