Working natural gas in storage ended October at 3,571 bcf, a record increase of 2,734 bcf during the Apr. 1-Oct. 31 injection season, and within 7% of the average of the last five end-of-season storage levels, according to data from the US Energy Information Administration.
“While end-October natural gas stocks are at a 5-year low, increased natural gas production, which has reached an all-time high, and new pipeline projects will help meet winter natural gas demand,” EIA said.
As of August, dry gas production was 3.5 bcfd higher compared with the same month a year ago. Even if this winter were as cold as last year, EIA expects that gas storage at the end of March 2015 will be above its March 2014 level, largely because of the gains in US gas production.
After a prolonged and severe winter, inventories by the end of this March were about 1 tcf below the 5-year (2009-13) average, recording an 11-year low. Although the refill season began slowly in April, injections quickly ramped up and exceeded 5-year average levels for 28 weeks in a row, narrowing the gap between current inventories and the 5-year average to 261 bcf. Meantime, analysts often refer to the injection season as ending on Oct. 31, but the peak in storage inventories may come later, as it is common for injections to continue into November.
The October Short-Term Energy Outlook projects inventories will drop to 1,532 bcf by the end of the heating season on Mar. 31, 2015. This projection is based on National Oceanic and Atmospheric Administration projections for relatively normal winter weather with temperatures much milder than the 2013-14 winter season. Continued high levels of production expected through next spring will also help reduce the need to withdraw gas from storage over the coming winter.
This increase in supply has led to falling prices. After spiking to 6-year highs of above $7/MMbtu in February, daily spot prices at the Henry Hub benchmark have declined over the past several months, as weekly inventory additions have been consistently high and production continues to rise.