The Connecticut governor was operating with some bad data when she issued a press release Thursday accusing the natural gas industry of attempting to drive up prices by cutting off production needed to fill storage. Gov. M. Jodi Rell based her price manipulation accusation on the proposition that the natural gas storage for winter is lagging, when in fact it is nearly full, topping out above 3 Tcf in the last few weeks -- a month and a half before the official start of the winter season.
Rell cited a Sept. 6 news report from Marketwatch as saying the storage build had been just 23 Bcf above the five-year average. In fact, the incremental storage build reported by the Energy Information Administration that week was 36 Bcf, or 31 Bcf below the five-year average. But the total amount of gas reported to be in storage on that date was 3,005 Bcf or 284 Bcf more than the five-year average. At this rate by the start of heating season storage may set a new record and define just how much storage capacity there actually is.
Producers have been shutting in gas in recent weeks because there is little current use of gas in this shoulder season, when gas use for air conditioning is declining and there is little demand for heating fuel. The pipes are packed and there is little room left in storage. While it is something of an anomaly because of the special conditions afflicting Rockies gas, nevertheless NGI's price survey picked up an all-time record low price in the Rockies this past week of 7/cents/MMBtu. On Friday the IntercontinentalExchange reported a sale at Opal for 1/cent/MMBtu.
Overall prices have moved up some this week with the threat of hurricanes, but across the country they had been languishing in the $5-$6 range for some weeks before the storms appeared on the horizon. Some analysts have predicted that without a full-blown hurricane in the Gulf, prices could go into the $4.00s.
In the meantime producers have managed to grow the nation's natural gas resource base nearly 17% over the past two years, the largest volumetric and percentage hike in the biennial gas resource estimate since 1968, the Potential Gas Committee said in its latest report, "Potential Supply of Natural Gas in the United States" which was issued Thursday. There were an estimated 1,525 Tcf of total gas resources reported at year-end 2006 -- the equivalent of 82 years of production at current rates (see separate story).
In her press release Rell asked the chairmen and ranking members of the U.S. House and Senate committees with oversight of the energy industry to begin an immediate investigation into possible natural gas price manipulation, citing news reports that producers were shutting in production. She also mentioned contributing problems with refineries?? One outraged analyst told NGI it hardly made sense for producers to push their gas into today's glutted, low-priced market when that gas will be needed in a few months to serve the peak winter demand.
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