Declining US summer production levels keep storage low, gas prices high

US natural gas production is now rising, but declining levels of production throughout the past summer have driven down the pace of gas storage injections. In a report released Wednesday, New York-based investment firm Salomon Smith Barney said lower levels of storage injections will keep gas prices high as the US enters the last 6 weeks of this year's storage injection season.


US natural gas production is now rising, but declining levels of production throughout the past summer have driven down the pace of gas storage injections. In a report released Wednesday, New York-based investment firm Salomon Smith Barney said lower levels of storage injections will keep gas prices high as the US enters the last 6 weeks of this year's storage injection season.

US storage levels are expected to enter this winter season at close to 2.6 tcf vs. the 3 tcf level this time last year, a factor that will keep upward pressure on gas prices. Storage is currently hovering around 15% below year-ago levels.

Salomon Smith Barney also noted that the American Gas Association reported that the US underground storage gas injections the week of Sept. 22 totaled 77 bcf compared with 79 bcf during the comparable week last year and 41 bcf in 1998.

"The bottom line remains that, if this winter matches the 10-year average in terms of weighted heating degree days, then storage levels next spring coming out of the withdrawal season are not likely to be any higher than 600 bcf," said Salomon Smith Barney.

Warm weather in the first half of November could make the difference, however. By pushing down demand and prices, the warm weather could provide an incentive for gas players to inject into storage, said Salomon Smith Barney.

But autumn temperatures are expected to follow normal patterns, without the La Nina phenomenon to interfere with normal temperatures, according to the National Oceanic and Atmospheric Administration and Weather Services International.

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