Net injections during the refill season (April 1–October 31) will bring the total working gas in storage to 4,029 Bcf, the U.S. Energy Information Administration’s (EIA) forecast. If realized, would be the largest monthly inventory level on record.
Mild winter weather pushed down gas prices and led to smaller gas withdrawals from storage for heating and power generation. Demand for natural gas tends to be highest in winter months due to space heating, while gas-burn in the power sector greatest in summer months, when overall electricity demand rises because of air conditioning.
Abundant production outpaces exports
On the supply side, the continuous growth in gas production outpaced exports of both pipeline gas to Mexico and LNG which propped up storage levels to record high.
At the start of this heating season, total gas in storage stood at 3,725 Bcf at the end of October. EIA analysts anticipate withdrawals from working gas storage to total 1,790 Bcf at the end of March 2020.
In its February Short-Term Energy Outlook (STEO), the EIA expects the total working gas in storage will exceed the previous five-year average for the remainder of 2020, despite declines in dry gas production, increases in gas-burn in the electric power sector, and rising exports.
Monthly gas production is seen ease off 2020 from last year’s record levels as lower Henry Hub prices reduce incentives for gas-directed drilling and as lower crude oil prices curb drilling activities for oil and associated gas.