U.S. Natural Gas

Energy Strategist (08/18/2010)
Above-average temperatures this summer and storms in the GOM have produced some spikes in North American natural gas prices over the past three months; but, generally speaking, the market remains depressed. Natural gas has averaged $4.50/Mbtu since the end of the first quarter.

But U.S. gas storage levels have increased at a slower pace.

U.S. Gas Storage Chg. Deviation from Avg.
Source: Energy Information Administration

This graph tracks weekly gas storage statistics compared to the five-year average. Negative numbers indicate gas in storage is either falling at a faster-than-normal pace or rising at a slower-than-average rate.

As you can see, the cold winter of 2009–2010 drove above-average gas consumption for heating and pushed storage levels sharply lower. But any gains made during the winter months were immediately reversed during the spring shoulder season, a period of weak gas demand.

U.S. gas production increased throughout the year, but abnormally cold winter weather masked this growth; as soon spring sprung, excess production began to show up in weekly storage statistics again.

This summer has yielded consistently bullish storage statistics, returning inventories to normal levels.

U.S. Gas Storage
Source: Energy Information Administration

In this graph the blue line represents the five-year minimum storage level; the red line, the five-year maximum; and the green line, the current path of storage. Starting in April, U.S. gas in storage set new seasonal records up through July 1. Around this time—just when Americans are firing up air-conditioning units—the green line begins to trend toward normal levels; storage is about 7.9% above the five-year average but 5% below the level in 2009.

The short-term concern for gas: Summer weather will keep demand high for a few more weeks, but the fall shoulder season presents problems.

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