According to the “Weekly Natural Gas Storage Report, Short-Term Energy Outlook” by the U.S. Energy Information Administration (EIA), working natural gas in storage is above five-year levels for the first time in more than a year. Stocks are 58 billion cubic feet (Bcf) greater than the five-year average, standing at 2,157 Bcf as of February 13.
While the recent spate of cold weather across the Midwest and East may draw down stocks enough to push them below the five-year average, production in February and March is forecast to average 5 Bcf a day above last year’s average, which would contribute to robust inventory and moderate prices as we head into the shoulder months. Although there were several near-record withdrawals early in this heating season, more recent withdrawals have been far below the record levels of last winter and are 16 percent lower that the five-year average.
The increase in storage is because of a combination of recent high production and moderate demand. These factors have also kept prices relatively low. The EIA predicts inventories will end the injection season at over 1,600 Bcf, which would be 43 Bcf over the five-year average.
Increased natural gas production has been offset by peak use demand periods, mitigating the need for storage capacity. Market analytics company Bentek Energy reports average dry natural gas production of 71.7 Bcf per day since November 1, 2014. That is more than 6 Bcf per day more than was produced during the same period a year prior. The EIA is forecasting a continued high level of production through March, with an average of 72 Bcf per day.
While production remains high, demand this winter was reduced, despite the Northeast being buried in snow. Above-average temperatures across the western half of the country helped offset demand in the Northeast. According to Bentek Energy, natural gas consumption averaged 88.4 Bcf per day since November 1, 2014, which is 3.3 Bcf per day lower than the same timeframe a year ago. The EIA forecasts closer to normal temperatures, which will reduce consumption across the country to 88.1 Bcf per day through March, the end of the heating season. That is compared to last year’s 90.9 Bcf per day for the same period.
These factors have helped keep Henry Hub spot prices and NYMEX near-month futures prices at relatively low levels over the past few months. Prices started above $4 per million British thermal units (MMBtu) in November and were trading below $3 MMBtu in January.