From the Energy Information Administration:
In the News:
Decreasing natural gas price seasonality keeps inventories in April at 11-year low
Natural gas net storage injections for the Lower 48 totaled 82 billion cubic feet (Bcf) for the week ending on April 25. This was the fourth consecutive week of net storage injections, which this year began in the week ending on April 4. Over this period, cumulative net injections totaled 163 Bcf, a 53% increase when compared to the same weeks in 2013, but only 8% above the 5-year average for these weeks of 151 Bcf. Total Lower 48 working inventories totaled 981 Bcf, an 11-year low. This was well below the 2009-13 minimum for that week of 1,716 Bcf, as can be seen from the storage graph below this article. It is also the latest point in the year that inventories have remained below 1,000 Bcf since 2003. Despite a steady increase in natural gas supply, current high spot prices coupled with comparatively low price expectations for the upcoming winter season, when stored volumes are likely to be withdrawn, have put a damper on natural gas storage injections in April (Figure 1).The price action since yesterday's (11%) larger-than-expected storage injection:
Lower 48 working natural gas inventories started the injection season on April 1 at 824 Bcf, their lowest level since April 1, 2003, following a record natural gas 2013-14 winter storage withdrawal of 2,970 Bcf (Figure 2). This contributed to the highest natural gas spot prices in April since 2008. The higher spot prices likely narrowed the expected return from storing natural gas because forward contracts thus far show moderate prices for winter. The difference during days when natural gas contracts were traded in April between the most expensive monthly natural gas delivery contract for the upcoming winter season (November to March), and the front-month contract (May, and June for the final two trading days in April), has decreased to almost zero (Figure 3). This means that producers have little incentive to store their output in April, because they have almost no expected payoff from withdrawing and selling it when demand peaks during the upcoming winter season, compared to what they could make from selling it to consumers in the current market.
The lower expected return from storing natural gas reflects a trend that has occurred generally in recent years, as increased natural gas production, particularly in consuming states such as Pennsylvania, has contributed to decreasing seasonality in natural gas prices. In April 2013 and April 2014, the average difference in the maximum winter futures contract and April spot prices was 31 cents per million British thermal units (MMBtu), compared to an average of $2.14/MMBtu in April 2011 and 2012. The expected return from storing natural gas has thus fallen significantly, not accounting for costs directly associated with storing gas. Partially as a result, average net storage injections for weeks 14-17 (corresponding with the weeks ending on April 4 and April 25) fell by 51%, to an average of 135 Bcf for April 2013 and 2014, versus 204 Bcf for April 2011 and 2012....MUCH MORE
