Gas storage lags; AGA says too early to worry

After a June heat wave, cooler weather in California kept the lid on gas prices in the western US during the past week. But injections of natural gas into storage are still running behind last year and historic patterns, say the American Gas Association and US Department of Energy analysts.


After a June heat wave, cooler weather in California kept the lid on gas prices in the western US during the past week. But injections of natural gas into storage are still running behind last year and historic patterns, say the American Gas Association and US Department of Energy analysts.

The Energy Information Administration estimates cumulative net additions for June were 306 bcf and the level of working gas at the end of June totaled 1,750 bcf, or 8% below EIA's 5-year average of 1,909 bcf for the end of June.

The figure is 19% or 412 bcf below June a year ago. But EIA analyst Patricia Wells points out the amount of gas in storage in June 1999 was the largest volume for that month since the 2,553 bcf in storage in 1991. June injections were off 12% from historic patterns for the month.

But continued additions at a comparable level during the next 4 months would result in working gas in storage of only 2,695 bcf by the start of the winter heating season November 1, down from 2,991 bcf in November 1999.

However, the AGA, which represents natural gas utilities, says, "All indications are that gas in storage will be at targeted volumes" by winter's onset. The organization notes working gas in storage actually exceeded the 5-year average for 10 of the first 15 weeks of this year.

The AGA concedes early-season injection rates have begun to trail the 5-year average. Noting the Northeast, the most heating-load sensitive US region, has ended the winter season as little as 9% full, the trade group insists it is still too early to tell what impact storage injection requirements, summer electric generation load, production deliverability, and commodity prices will have on summer underground storage refill.

In every case and under significantly different price and demand conditions, the AGA says, summer injections have resulted in working gas levels that were 95-99% full by the start of the winter heating season in November.

Data is not yet available to quantify the magnitude of the impact of the electric generation market on current natural gas demand, says the AGA, demand by gas-fired generation is considered a faster growing component of the market than industrial use.

Gas futures prices continue to be volatile, evidenced by day-to-day changes and expanding price ranges for trade of the August contract, which grew from 21� to 34� in a 2-day period last week, says the EIA. When the August contract traded at $3.98/MMbtu July 6, it was the first time a near-month contract traded under $4 since June 20, the EIA says.

Spot and futures prices remain unusually strong, the agency says. However, EIA analysts say cooler weather in some regions of the country and lower prices could induce more storage injections.

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