The gas storage surplus could have a bite taken out of it this week, according to consultant Stephen Smith, who’s predicting only a 17 Bcf injection in the weekly report by the Energy Information Administration (EIA). Furthermore, Smith believes that this week’s storage report, which he expects will show 3,459 Bcf of working gas in storage as of Oct. 20, may end up being the peak level of working gas for the injection season because of the early cold weather.
“If the current [heating degree day] forecast for the next two weeks holds up, the storage report for the week ending Oct. 20 should prove to be the peak — while not as large as once projected because of the early cold weather in the Midwest and Northeast (and also some shut-ins), this remains a formidable storage surplus,” said Smith.
There were about 22% more (colder) HDDs than normal last week, and for the next two weeks there are expected to be 31% more HDDs than normal (Oct. 27) and 22% more HDDs than normal (Nov. 3). This could mean net storage withdrawals going forward, according to Smith. He’s expecting a 9 Bcf withdrawal in the storage report for the week ending Oct. 27 and a 19 Bcf withdrawal the following week.
Bentek Energy said last week that storage withdrawals already were kicking in on Dominion Transmission, at the Egan storage hub in the Gulf Coast producing region and at the Jackson Prairie and Colorado Interstate Gas (CIG) Latigo storage fields in the West (see Daily GPI, Oct. 18).
“The gas futures market has magnified this early cold weather and projected above normal HDDs for the winter — although different weather forecasts range from colder than normal to warmer than normal at this point,” said Smith. Last week’s futures market rally left prices on Friday $1.582 higher than where they were a week earlier ($7.241 for the near-month contract compared to $5.659). “The gas price appears to have temporarily gotten ahead of the weather uncertainty and priced in colder weather.”
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