Natural Gas, And Lots of It

With natural gas storage in the U.S. having just surpassed the record levels of 2007, and with every available pipeline, tank, crevice and rock now being forced to hold the stuff, I have visions of that scene in the movie Brazil when Jonathan Pryce turns the mail tube around and sends mail back into the system. That didn’t turn out well, did it.

Here is Bloomberg:

The steepest rally in natural gas prices since 2006 is coming to an end as the 400 salt caverns, depleted oil fields and aquifers used to store the fuel in the U.S. reach capacity for the first time.

Stockpiles may surpass the record of 3.545 trillion cubic feet by as much as 350 billion cubic feet this fall, Energy Department estimates show. Gulf South Pipeline Co. says its fields in Louisiana and Mississippi are so full that customers will have to pay penalties for exceeding their limits. With no place to go, producers will be forced to dump excess fuel on the market.

…“I don’t know where all of this gas is going to go,” said Schork, a former natural gas trader on the New York Mercantile Exchange, who in June forecast inventories would reach near 3.8 trillion cubic feet. “We’re a month away from significant heating demand. Something’s got to give.”

Check natural gas price (as proxied by UNG) and supply over the last couple of years in the following chart:

More here.

Comments

[Freya:]

So much Nat. Gas in fact that Production is being curtailed. So Now comes along, the Coldest Winter of the Decade. (Bloomberg)

Try to turn the spigots on at a moments notice.

Sep 28 02:49 PM

[Aricool:]

what was the point of your article? Was it that SA followers should go to Bloomberg for real helpful information/commentary on Nat. Gas? I'm increasingly learning this to be the case.

Also, using UNG as a "Proxy for Nat gas" is very amateurish for well known reasons.

Sep 29 05:17 AM

[Jack Yetiv:]

I've now been reading for months about how storage is going to fill up causing gas to be "dumped" on the market, but the math does not add up. Experts are projecting an injection of 50-60 BCF to be reported this Thurs, Oct. 1, which should put total amt of gas stored at 3.6 TCF. I have read we have somewhere between 3.8 and 4.0 TCF of storage capacity, with the best number, I believe, being the midpoint, 3.9 TCF. That means we can store 300 BCF more before storage is full (yes, I realize different storage locations may have differential fills, but I am talking across the US).

If we continue storing an average of 55 BCF per week, on Oct. 29, we should be at about 3.8 TCF--just approaching full on the 3.8 TCF storage capacity number, and a bit under full if you believe the 3.9 TCF number, and even more under if you believe 4.0 TCF of storage capacity.

Usually withdrawal from storage starts in the beginning of Nov. Therefore, unless I'm missing something, there won't be many days (if any) of "dumping" before withdrawal from storage begins.

Jack Yetiv

Sep 29 10:14 AM

[Trane250:]

With such a huge surplus of natural gas, why not liquefy it for export? Goodness knows we could use the revenue.

Sep 29 11:04 AM

[Ron2008:]

The 5 year average has injections going 2 weeks into Nov. The first withdrawal from storage, based on the 5 year average is the 3rd week of Nov.

The 5 year average of injections from the report this week through the end of the injections is 374 (EIA data). That would put storage at 3.9 TCF.

Also, while the total number may have some room left, getting the NG to these storage facilities is the major problem.


On Sep 29 10:14 AM Jack Yetiv wrote:

> I've now been reading for months about how storage is going to fill
> up causing gas to be "dumped" on the market, but the math does not
> add up. Experts are projecting an injection of 50-60 BCF to be reported
> this Thurs, Oct. 1, which should put total amt of gas stored at 3.6
> TCF. I have read we have somewhere between 3.8 and 4.0 TCF of storage
> capacity, with the best number, I believe, being the midpoint, 3.9
> TCF. That means we can store 300 BCF more before storage is full
> (yes, I realize different storage locations may have differential
> fills, but I am talking across the US).
>
> If we continue storing an average of 55 BCF per week, on Oct. 29,
> we should be at about 3.8 TCF--just approaching full on the 3.8 TCF
> storage capacity number, and a bit under full if you believe the
> 3.9 TCF number, and even more under if you believe 4.0 TCF of storage
> capacity.
>
> Usually withdrawal from storage starts in the beginning of Nov.
> Therefore, unless I'm missing something, there won't be many days
> (if any) of "dumping" before withdrawal from storage begins.
>
> Jack Yetiv

Sep 29 12:19 PM

[Freya:]

Hasn't anyone noticed current NG prices? If "Dumping" is going to occur, why aren't prices slumping.

I was forced to turn on the Heat last night. Sub-66 in the living room tends to feel cold even when warmly dressed.

I do not want to wear gloves, hampers the use of the Remote

Sep 29 05:22 PM

[meridian575:]

Natural Gas. Just one of the many terms being thrown out there when the energy trade is discussed. How effective is natural gas in offsetting our oil dependence here at home? No one is absolutely sure as to the amount of natural gas reserves, and production seems to fluctuate ever-so-rapidly with speculation of its industrial and transportation uses. Nonetheless, I have read that our own reserves can sustain our country for the next 80 years, purely on natural gas alone. Yahoo Finance has an article about the DOE Clean Cities initiative and other programs that are getting government funding to promote natural gas usage on public roads and in industry. Take a look:
finance.yahoo.com/news...

Oct 01 11:59 AM

[Zeon:]

Trane250: It's difficult to get an LNG facility going. People don't want them in their backyards so they almost have to be located well off the Gulf Coast. They would be expensive to build and at great risk during hurricane season, which lasts six months. Then, there's today's markt, or lack thereof,t for NG

Oct 12 07:56 PM