Thursday, January 19, 2012

EIA: Storage -87 Bcf to 3.29 Tcf

The weekly EIA working gas in storage report showed an 87 Bcf decrease to 3.29 Tcf, which is WAY TOO HIGH. The weekly injection was 62% less than last year (-228 Bcf) and 46% below the five year average (-162 Bcf). The current level is 19.6% above last year and 20.8% above the five year average.

4 comments:

Anonymous said...

This is much worse than most people realize because they don't understand how moving averages work. The 5yr average now is much higher than say 3 years ago. 3 years ago the 5yr average would have include the shortfall caused by the 2005 hurricanes, but now the 5yr average includes the last 2yr of record storage.

I also heard on CNBC how a lot of pipelines are being used as storage instead of transportation and I bet that the stats don't include this gas.

Robert Hutchinson said...

See the next post (http://www.haynesvilleplay.com/2012/01/storage-up-up-up-prices-down-down-down.html). I took your point about the 5 year average and illustrated it.

Bill Mendenhall said...

The huge amount in storage here in January makes perfect sense in light of (a) the push over the past 3 years to move all leases to HBP status, and (b) this year's extremely mild winter. As an example, in the Haynesville, a huge percentage of the outstanding leases were signed in or around 2008, and the initial wells for many of those leases are just now coming on line at high IPs.

The real question is whether producers will actually slow down now that they have reached HBP status. The only way back to a better price seems to be a steady drop in rig count for a long enough period to allow production to run off.

Robert Hutchinson said...

Bill:

A lower gas rig count certainly will help but I believe the bigger danger is the associated gas produced when drilling for oil. Since the independents are all chasing oil for their survival, the gas they produce in that pursuit is incidental and only serves to sweeten their well economics.

By quantity it is not as much as shale gas, but since a large quantity of it hits the market and the producers are largely indifferent to its economics, it will continue to weigh on the storage/price situation.

It is an unintended consequence that will continue to pressure the dry gas market irrespective of rig count.

Just looking at 2011, the Haynesville rig count has been cut in half, but overall gas production continues to rise. I know it is a lagging measure, but declining rig count has yet to impact production. Most analysts expect to see a slight drop in Haynesville production in 2012, but that won't make much of a difference in the big picture.