News / Business
Natural Gas Prices to Dip as Storage Refills
Natural gas storage inventories are the highest ever this early in the injection season. The rapid injection pace is likely to result in a building of pipeline pressures that will ultimately cause production curtailments and a short-term supply glut.
With natural gas storage inventories already at 3,089 Bcf, the maximum capacity of storage is expected to be tested this year. It really isn’t a question of “if”, but “when” storage inventories will cause production curtailments.
“Think of it like a balloon,” says Valerie Wood, President of Energy Solutions, Inc. “When a balloon starts to get full, you become increasingly careful not to blow too much air into it, forcing it to pop. Natural gas storage is very similar. As a storage field starts to become full, injections taper off because the pressure within the field begins to rise. If there is more gas put into the pipeline than can go into storage, then the pressures within the interstate or intrastate pipeline also begin to rise. If this occurs, producers may be forced to curtail production and they will do that by shutting in wells.”
The storage injection season extends from April 1 through October 31 of each year. In parts of the south, storage serves as a replacement supply should there be disruptions from tropical storms. In the Midwest and Northeast, storage serves as a supply source in the winter when residential demand is very high.
“Storage will continue to have a dampening impact on natural gas prices,” says Wood. “Some of that impact may already be built into prices. However, we anticipate that many storage fields will reach capacity up to a month ahead of the normal schedule. As this occurs, the nation is going to end up with an overall supply glut that will pull natural gas prices down.”
In its latest monthly edition of The Advisor, Wood provides additional insight into how natural gas storage will impact prices this fall, but more importantly what storage means to prices in 2010, particularly if producers are forced into supply curtailments. Request your free copy of the August 2009 edition of The Advisor by sending your request to request@energysolutionsinc.com or call (608) 848-9589.
About Energy Solutions, Inc.
Formed in 1996, Energy Solutions, Inc. is independently owned. With more than 25 years of experience in the natural gas industry, our team focuses on natural gas prices and in helping businesses improve their internal processes for the purchase of natural gas.
