Working natural gas levels as of September 21 were at 3,576 Bcf, representing an implied net injection of 80 Bcf from the previous week, the highest storage build of the 2012 injection season.
This injection season, additions to working natural gas inventories have been below the five-year (2007-2011) average injections as well as below last year’s injection levels, for all but three weeks, including the most current week. Despite lower injections, overall inventory levels remain at historical highs and are expected to hit a new record at the end of October, when the traditional injection season ends. The U.S. Energy Information Administration’s (EIA) Short-Term Energy Outlook (STEO) expects that inventory levels will end the heating season at 3,950 billion cubic feet (Bcf), a new end-of-October record. The STEO projects record high levels—despite the low injections this season—because inventories began the season at a very high level.
This injection season began with 2,477 Bcf of working natural gas in storage, coming out of a warm winter that required low withdrawals to meet depressed heating demand. (In 2011, the injection season began with 1,581 Bcf in storage.) While EIA expects inventory levels will end the injection season at a record high, the projected increase of 1,473 Bcf in working gas inventory during the 2012 injection season would be the smallest build since 1991.
The Henry Hub day-ahead price registered a generally steady increase for the week, stalling briefly on Friday before resuming an upward track for the balance of the reporting period, closing at $2.92 per MMBtu yesterday, up 8.1 percent. Prices at many downstream trading locations recorded overall increases, generally dipping somewhat before rebounding toward the end of the reporting week. For example, the Southern California Border Average price ended higher as temperatures remained relatively warm for much of the period (reaching 94 degrees in Los Angeles over the weekend); prices started the report week at $2.98 per MMBtu and finished yesterday at $3.21 per MMBtu, up 7.7 percent. Prices at the Transcontinental Pipeline’s Zone 6 trading point (which serves New York City markets) declined from $2.91 per MMBtu last Wednesday to $2.83 per MMBtu on Friday, then rebounded to $3.07 per MMBtu by week’s end (up 5.5 percent).
Certain locations in the Northeast saw prices trending considerably lower following completion of pipeline maintenance on Algonquin Gas Transmission’s system. At the Algonquin Citygate trading point (for delivery into Boston), spot prices started the current reporting week at $3.72 per MMBtu, but continued last week’s steady decline, dipping to $3.06 per MMBtu on Monday before regaining some ground on Tuesday and yesterday, closing at $3.18 per MMBtu (down 14.5 percent for the week). Algonquin Citygate prices had reached $4.52 per MMBtu during the previous reporting week.