Last week served as a good indication of just how much gas-fired power generation has been added to the nation’s grid over the last five years and will serve as a key marker of summer gas usage going forward. For an unprecedented second week this summer, record gas demand from power generation forced a net drop in storage during a period when historically there were significant net injections.

The Energy Information Administration (EIA) reported that 12 Bcf of gas was withdrawn from storage during the week that ended Aug. 4, during which there was record power usage in many regional power grids but particularly in the East and Midwest. That withdrawal followed the 7 Bcf withdrawal only two weeks earlier when there was record power usage on every major power grid nationwide.

Included in the latest weekly net drop was an unprecedented 1 Bcf decline in the key eastern consuming region, where local distribution companies own the bulk of the traditional reservoir storage capacity and typically put gas in the ground on a set schedule with very little fluctuation. A massive 18 Bcf of gas was withdrawn in the Producing region, where there is significant salt dome storage, which can respond more quickly to demand changes. The West, however, injected 7 Bcf.

Working gas levels now stand only 14% above levels last year in the East, 3% above levels last year in the West and 14% above levels last year in the Producing region. Total working gas levels, at 2,763 Bcf, are 12.5% higher than levels last year compared to 15% a week earlier and a peak of 39% on March 17. Working gas levels are 15.7% higher than the five-year average of 2,389 Bcf.

A major reason for the latest net withdrawal was the heat on Tuesday Aug. 1. The blistering summer heat on that day drove gas demand from generation all the way up to 42.3 Bcf/d, according to data from Bentek Energy’s U.S. Power — Gas Burn Report, which tracks flows to 420 gas-fired power plants nationwide to provide estimated total demand.

To put that record level into perspective, consider that average gas demand for power-gen was only about 25.2 Bcf/d in August 2005, according to EIA data. Total gas demand from all sectors of the market last August averaged 54.3 Bcf/d.

Data on gas flows to power plants through Aug. 9 show demand month-to-date is up about 7.2 Bcf/d from where it was over the same period last year. Gas demand from power generation during the month of July averaged about 30 Bcf/d compared to less than 25 Bcf/d during July 2005.

Despite average temperatures last summer that were 15% above normal, gas demand from power generation this summer is 16% higher (2.9 Bcf/d) than last summer to about 22.2 Bcf/d, Bentek said.

Although gas prices have been high, until just recently their relationship to even higher oil prices has made gas a much more attractive alternative to generators. The substantial increase in the amount of gas-fired generation in the U.S. over the last five years also has served to dramatically increase the level of demand from generation nationwide.

If the trend of above normal temperatures were to continue through August, the market would see the storage surplus continue to decline. However, gas burns by generators have trailed off somewhat since the peak of 42.3 Bcf/d on Aug. 1. For example, gas flows to generators last Wednesday were averaging about 30.8 Bcf/d, according to Bentek’s report.

“The estimated burn for [the week ending Aug. 11], corresponding to next week’s EIA [storage report] is 221 Bcf, about 36 Bcf less than last week’s burn of 257 Bcf,” Bentek said. As a result, storage levels should be back on the rise again.

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