Volatility likely after AGA, EIA swap on storage data

March 25, 2002
US natural gas markets may suffer some short-term uncertainty and volatility after the American Gas Association relinquishes to the Energy Information Administration its duties of compiling and publishing weekly natural gas storage data in May. However, in the long term, the transfer will be a positive development, according to a report released earlier this month by Simmons & Co. International, Houston.

US natural gas markets may suffer some short-term uncertainty and volatility after the American Gas Association relinquishes to the Energy Information Administration its duties of compiling and publishing weekly natural gas storage data in May. However, in the long term, the transfer will be a positive development, according to a report released earlier this month by Simmons & Co. International, Houston.

When the EIA takes over the collection and compilation of storage data, it will use a different methodology than that used by AGA, Simmons noted. Also, EIA will be surveying a different set of companies, the firm said. These changes, in the short term, should be monitored closely by industry as they "will promote uncertainty in the market and could potentially create false indicators of the health (or otherwise) of the US gas market," Simmons said.

Changes in methodology

Based on knowledge that is currently available to the public about the EIA's data collection and calculation methodology, Simmons said that the administration's survey will include at least 50 companies, which is 4 more than those surveyed by AGA. "It should be noted that not all of the companies currently reporting to the AGA are included in the EIA sample," Simmons said.

The 46 companies included in AGA's survey account for 85% of all working gas storage volumes in the US, according to AGA. These data are organized into three regions: producing region, consuming region west, and consuming region east. Each operator is asked to submit three data points by Tuesday every week, Simmons explained. These data points were for working gas in storage at 9 a.m. on the previous Friday, the corresponding level a year ago, and the maximum level of working gas held at any time in the last 10 years.

Click here to enlarge image

The companies surveyed by EIA will account for more than 85% of total storage capacity. Unlike AGA's, EIA's survey will comprise one data point—the level of working gas in storage as of the previous Friday. These data will be compiled for each of the three regions covered in the AGA survey, Simmons explained, and then "grossed up" to give a total US working gas storage level.

"Importantly, the intention is that the weekly survey data should reconcile with the EIA Natural Gas Monthly report, which in turn reconciles with the Natural Gas Annual. This should lead to improved data accuracy, as increased work 'up front' will make the monthly and annual report reconciliation easier." Simmons said.

EIA has yet to decide when during the week it will release its data, but Simmons speculates that Wednesday afternoon or early Thursday, before markets open, would be most likely. The survey will first be published either May 8 or 9. "When the EIA goes live," Simmons said, "it will simultaneously issue a report on their findings from the parallel 'dry runs' with the AGA and provide analysis of discrepancies with the AGA data."

What to expect

Based on Simmons's initial analysis—which compared AGA and EIA working gas storage levels on a monthly basis during 1995-2001—the AGA data closely matched the EIA data, "both on absolute storage levels and monthly changes." There are, however, "some clear and material differences in the datasets," Simmons noted. "The EIA storage levels are, on average, about 90 bcf (4%) higher than the AGA data."

Given the more complete datasets by the EIA, this discrepancy is not surprising, Simmons said, adding, "More surprising is the seasonal variations in the storage differentials between the EIA and AGA." According to Simmons, during March-April (at the end of the withdrawal season), EIA reports much higher storage levels than does AGA. And, during September-October (at the end of the injection season), EIA reports a smaller differential. "On average," Simmons reported, "the EIA reports storage levels 140 bcf above the AGA in March-April and 35 bcf higher in September-October."

Considering how closely the market follows movement in storage levels, Simmons said "such divergent data is cause for concern." Simmons concluded, "Based on our analysis, gas market followers should expect reported storage volumes to increase in May (by around 130 bcf) when the EIA begins publishing. Injection levels are likely to be lower through the summer."