Injections of natural gas into storage since April are 20% higher than the five-year average (2010-14), but trail last year’s record-high levels
During the first four months of the 2015 natural gas storage injection season, which typically runs from April through the start of November, injections have totaled 1,436 billion cubic feet (Bcf). Injections this year are 20% higher than the five-year average, but are 7.5% lower than last year’s record-high levels over the same period. Inventories as of July 31 were 2,912 Bcf, 535 Bcf, or 22.5% more than 2014, and 64 Bcf (2.2%) more than the five-year (2010-14) average for the week ending July 31.
Injections this year have exceeded the five-year average level by 317 Bcf, but are 116 Bcf lower than injections in 2014 over the April through July period. In 2014, there were record high injections after storage fell to 10-year lows following an extremely cold winter. Similar factors associated with the remarkable storage rebuild in 2014 are also supporting the high levels of injections that are occurring this year, especially year-over-year production growth. In 2014, Lower 48 dry natural gas production averaged 68.9 Bcf/d from April through July. Domestic production in 2015, despite lower oil and natural gas prices, continues to grow, averaging 72.5 Bcf/d from April through July 31, 5% higher than the same period last year, according to data from Bentek Energy.
Temperatures this year have been warmer-than-normal, with cooling degree days over April 1 through July 31 totaling 755, according to data from National Oceanic and Atmospheric Administration (NOAA). This is higher than last year’s relatively mild summer temperatures, and contributing to an increase in natural gas consumed in the electric generation sector (power burn). However, despite power burn averaging 27 Bcf/d since the beginning of April, 18.4% higher than last year, this increase has been offset by the higher production levels, allowing for robust injections.
Working natural gas inventories have exceeded their five-year average since May 29. At the start of the injection season, only the West storage region had inventories that exceeded its five-year average, after a relatively mild 2014-15 winter in that region. Currently, only the East region continues to lag its five-year average, although the gap has narrowed. The inventory level in the East began the injection season 184 Bcf below its five-year average, but has reduced that deficit by 62%, and, as of July 31 is only 69 Bcf lower.
Improving infrastructure in the Northeast for Marcellus and Utica shale plays will likely provide additional resources to increase injections. Additionally, weather conditions, as forecasted by NOAA, are expected to moderate for the second half of the summer, which may reduce power consumption, making more natural gas available for storage. However, this could be somewhat offset by recent natural gas-fired electric generating capacity additions and the retirements of coal-fired capacity over the past several months. In the current Short Term Energy Outlook, released July 7, EIA forecasts that total end-of-October stock levels will reach 3,919 Bcf, 3.2% higher than the five-year average, with all three regions exceeding their five-year averages. Several private analysts have forecasted peak storage at 4,000 Bcf, or greater.