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Warm Weather, Declining Generation May Lead to Another Storage Injection

Warmer-than-normal temperatures and an increase in nuclear power output last week put a dent in gas demand that could lead to another net gas storage injection in the weekly storage report from the Energy Information Administration (EIA), according to a number of industry experts.

Heating degree days were down 19% from normal levels last week and there are indications of a substantial decline in demand from gas-fired power plants -- as much as 3 Bcf/d less than the previous week, according to Denver-based consulting firm Bentek Energy.

Bentek's weekly gas storage outlook, which includes a sample of weekly data from gas storage operations across the country and a model to project the national total, calls for a 1 Bcf injection, which compares to a 1 Bcf injection during the same week last year, a 3 Bcf withdrawal over the last five years and a 5 Bcf injection in last week's EIA storage report.

But another report on national gas supply and demand that Bentek publishes using gas data from interstate pipelines across the country indicates that the weekly storage injection could end up being much larger, possibly 12 Bcf.

"The demand we've seen from power last week dropped just like a rock," said Bentek's Rusty Braziel. "It surprised us," he said, because gas demand from power generation has been unusually strong this fall. While weekly fluctuations in demand from power generation wouldn't normally have much of an impact on storage during this time of year, the change last week was large enough to show up in the storage report, according to Bentek.

Bentek's data shows a 21 Bcf drop in gas demand from power generation last week with the largest declines seen in Florida, the West and the Northeast. That's partly because of the warmer weather, but also because of an increase in nuclear power plant output. Nuclear power plant availability, although down 3.5% from levels last year, was up by 4.8% last week from the previous week.

The range of storage predictions from a Reuters survey extends from a 5 Bcf injection to a 22 Bcf withdrawal with an average expectation of a 5 Bcf withdrawal. The ICAP storage options auction on Wednesday resulted in expected weekly storage change of zero. Global Insight's Jim Osten said he's expecting a 7 Bcf withdrawal. And Consultant Ron Denhardt of Strategic Energy and Economic Research is expecting a 2 Bcf withdrawal.

Consultant Stephen Smith is predicting a 5 Bcf injection again this week in the EIA report. The National Oceanic and Atmospheric Administration said there were 108 heating degree days last week, 28 more than the prior week but 16 below normal and five less than the same week last year.

The EIA said working gas levels on Nov. 10 totaled 3,450 Bcf, including 1,962 Bcf in the East, 473 Bcf in the West and 1,015 Bcf in the Producing region. Working gas levels were 7.4% above the five-year average of 3,212 Bcf. A 5 Bcf injection into storage would bring working gas levels to 3,455 Bcf, just shy of the all-time record of 3,472 Bcf, which was posted at the end of November 1990.

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