Strong gas production is outpacing consumption with the surplus being put in storage or exported. Currently, the Lower 48 states’ cumulative net injections of natural gas exceed the five-year average by 16%, data by the U.S. Energy Information Administration (EIA) shows.
Net injections into working gas storage reached a record 102 Bcf for the week ending May 29, and cumulative injections were as high as 709 Bcf by that date.
Pace might slow over the summer
The pace of storage injections might slow over the summer if gas production falls significantly after major upstream companies have slashed their capital spending and shut in some wells. Market observers will close watch the rig counts, the number of new well completions, and the availability of fracturing crews to estimate whether the drop in domestic supply will be enough to stabilize prices, considering the substantial drop in industrial gas demand due to the coronavirus crisis.
Summer temperatures in the main storage regions will also influence how much gas will be used by peaking power plants to meet the need for air conditioning. This amount, in turn, affects the amount of natural gas available for summer injections.
EIA data shows that this year, working gas stocks entered the refill season at a relatively high level following a warm 2019/20 winter heating season. Yet, total net injections for the Lower 48 states reported so far in 2020 are the third largest ever reported, going back to 1994, when working natural gas stocks exceeded 1,500 Bcf entering the refill season.
