Friday, January 22, 2010

Oh the Weather Outside is Frightful...

...At least it will be in the upper Midwest next week.  Meteorologists expect an Arctic blast across the Midwest by about Wednesday.  That should increase gas consumption since 72% of homes in the Midwest use gas for heating.

It's pretty remarkable when you think about the amount of gas used over the past six weeks.  At the end of November, gas in storage stood at 3.837 Tcf.  Last week, the storage figure was 2.607 Tcf, a drop of 1.23 Tcf.  Average weekly withdrawals for the past six weeks have averaged 194 Bcf.  Six weeks ago, the gas in storage figure was 14.5% higher than the five year average.  Today, the storage figure is a shade lower than the five year average and is only 140 Bcf higher than the five year minimum.

Given this huge swing, one would expect the price of gas to rise more than it has.  I'm certainly no expert, but I think the long-term questions of oversupply/overproduction continue to weigh down prices.  There is the feeling that producers can just turn a knob somewhere and ratchet up production to meet any demand increase.  In any case, it's nice not to see weekly headlines about record gas in storage.

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