Ferguson’s Forecast: Why Gas Storage Reports are Worrisome

By Published On: February 26, 2005

Yesterday, the Department of Energy?s Energy Information Administration reported that there was 1,720 billion cubic feet of natural gas in storage as of February 18, while last year there was only about 1,080 bcf. The five-year average is 1,300 bcf. Since there is plenty of gas in storage, why worry? The tale these days isn?t a happy one because storage reports tell us much more than simply how much gas is stored. On average, we need about 158 bcf/week for heating and cooling. Unfortunately, the amount available has been below 158 bcf/week since early last November and is trending lower. The amount today is 140 bcf/week and is projected to fall to 133 bcf/week by the end of March. In other words, the amount of supply remaining after industry takes its share would be 25 bcf/week less than what we need to get through an average year of heating and cooling. We?ll be running a deficit of over one trillion cubic feet per year if the trend does not turn around. Industry uses about 60 percent of all gas in the U.S. fairly evenly throughout the year. The remaining 40 percent is used for heating in the winter and to run power plants to provide air conditioning in the summer. If, after industry takes its share, there is more gas available than needed for heating and cooling, the excess goes into storage. In the winter, when heating loads are high, gas is taken out of storage to meet the supply shortfall. I can calculate how much is being used for heating and cooling each week from weather data. Together with the change in storage, I know how much of our gas supply was unused by industry every week. Fortunately, there is plenty of gas in storage to cover even a trillion-cubic-foot deficit?for one year. But we would begin next winter with less gas in storage than for any other winter in the last decade. The possibility of shortages would be worrisome, and no doubt prices would rise. It?s worth paying attention to what the weekly storage reports are saying.

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