The winter apparently isn’t dead yet. After two weeks of solid net injections into gas storage, market observers were startled Thursday morning when the Energy Information Administration (EIA) reported a 9 Bcf net withdrawal during the past week. It was clearly a step in the wrong direction if the industry plans to make an attempt at rivaling the record injection rate in 2001 just to get storage back to near adequate levels by the beginning of next winter.

The EIA reported that working gas levels fell 9 Bcf last week to 671 Bcf, which is 44% below the five year average and 820 Bcf (55%) below levels at the same time last year. Working gas levels fell 2 Bcf in the Producing region last week and 7 Bcf in the East region. Levels have stayed the same at 167 Bcf in West for the last three weeks.

EIA estimated that there was 696 Bcf of working gas in storage at the end of March, the lowest season ending storage level since the EIA has been tracking storage, which goes back to 1976. In the weekly storage report, total working gas levels reached record lows on March 14 with 636 Bcf. In the East and Producing regions, stocks also reached record lows on March 14 with 267 Bcf and 197 Bcf, respectively.

Record lows mean a near-record injection amount will be needed to refill storage by next winter. About 2,300 Bcf would have to be injected into storage between April 1 and the end of October to reach an aggregate level that is generally considered to be adequate for winter demand, EIA said in its recent Short Term Energy Outlook. That injection rate would rival the rate seen in 2001, which was the highest since at least 1976, according to EIA.

In 2001, the industry injected 2,400 Bcf of working gas into storage between April 1 and Nov. 1 and kept on injecting because of the mild fall weather until storage rose to 3,254 Bcf on Nov. 30, a full month into the traditional withdrawal season. By then, 2,516 Bcf of working gas had been injected since the spring low on March 30, 2001.

But the situation is a lot different this year, according to Lehman Brothers analyst Thomas Driscoll. “In 2001 we had 3 Bcf/d more injections than normal because consumption had been crushed by the high prices that winter. The injection rates were enormous. We came out of winter so low that people were petrified. We had $10 gas, and demand was crushed. This year we had $10 gas too, but demand didn’t get crushed. That’s what it looks like anyway.”

Driscoll said despite the odd weekly withdrawal last week, which clearly didn’t match the heating degree days (Driscoll forecast a 35 Bcf injection), weekly injections have been near normal over the last four weeks given the weather situation.

“If you look at the last four weeks, we’ve been spot on once we adjust for the weather,” said Driscoll. “But I think what that tells you is that it’s going to be real tough to refill at a higher than the average rate this summer unless something changes. We can’t be spot on the long-term averages from here because the long-term average is like an 1,850 Bcf fill from here. If we only put 1,850 Bcf into storage, we’ll be in deep [trouble].”

If the industry injected its historical average amount of 1,850 Bcf from this week until the end of the injection season, working gas levels would only reach 2,521 Bcf at the start of next winter.

“Getting to normal storage before next winter will entail a combination of high spot prices during the spring and summer, strong natural gas drilling and development efforts and normal weather,” EIA said in its recent outlook.”The downside risks for storage would be a hot summer, poor natural gas drilling results, or continued tight oil markets, which would result in lower-than-normal inventories and the possibility of a new round of natural gas price spikes next winter.”

Another downside risk would be several more weeks of winter. Just when the folks in the Northeast put their sweaters and winter coats away for the season and stowed their snow shovels, Mother Nature tossed in another wintry weather mix this week. What will the next storage report bring?

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