Thursday, January 5, 2012

EIA Storage Report: "Houston, We Have a Problem"

The EIA working gas in storage report showed yet another disappointing net withdrawal this week.  The storage level only dropped 76 Bcf to 3.472 Tcf.  The weekly withdrawal was 44% below last year (-135 Bcf) and 28% below the five year average (-106 Bcf).  As a result, the current storage level is 11.4% (+356 Bcf) higher than last year and 15.2% (458 Bcf) above the five year average.

This is a serious problem for natural gas.

I don't necessarily expect gas prices to plummet in the very short term, as utilities will be snapping up cheap gas to use instead of coal, but with the current level so high, it will be very difficult to pare it back before the injection season begins again in a few months.

So, not only is natural gas facing an uphill climb against a slow economy, now it has to contend with a warm winter (so far).  In the past couple of years, gas benefited from a cold winter, or at least a few weeks of brutal cold, but so far this year it's been pretty mild, as the temperature differential map below shows.  Last week's temperatures were 4.9 degrees warmer than the 30 year average and 6.0 degrees warmer than last year.  Heating degree days were 15.3% below normal.

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