Gas supplies down 158 bcf for week AGA reports

Dec. 20, 2000—The American Gas Association Wednesday reported natural gas supplies, for the week ended Dec. 15, fell by 158 bcf to a total of 2,113 bcf, about in line with analysts’ expectations.

Robert Morris, energy analyst at Salomon Smith Barney Inc., predicted in his Monday report withdrawal of 145-160 bcf of natural gas would be made from U.S. underground storage. That compares with withdrawals of 116 bcf during the same period last year and 85 bcf in 1998.

As a result, the year-over-year storage deficit widened to 625 bcf, or nearly 23% below last year, 6 weeks into the traditional withdrawal season.

The U.S. winter season so far has been roughly 35% colder than the same period a year ago. Temperatures as measured in heating degree days, weighted by gas home heating customers, were roughly 21% lower last week than last year and 15% lower than the 10-year average.

Current projections continue to indicate colder than normal temperatures during the last half of December, according to the U.S. Energy Information Administration.

Gas supplies declined 46 bcf in the producing region; 100 bcf in the consuming region east; and 12 bcf in the consuming region west. The drawdowns left the producing region 55 % full, compared to 60% a week earlier; the consuming region west 60% full, compared to 62% a week earlier, and the consuming region east 70% full, compared to 75% a week earlier.

Analysts are predicting the U.S. could end the winter season with record low amounts of gas in storage. To avoid untested levels, gas prices must continue to rise sufficiently to discourage 5-10 bcf/day of demand during the last 90 days of winter, says Marshall Adkins, chief of research for Raymond James & Associates, Inc., Houston.

“In other words, the U.S. will likely see some form of price-driven rationing of natural gas in the second half of the winter,” he says. What will it take?

Hard to say, Adkins says, since gas prices of $5-$9/Mcf have failed to significantly slow gas demand. On the New York Mercantile Exchange Wednesday, the January natural gas contract closed at $9.326/Mcf, up 22 cents. With natural gas prices running at such high levels, Raymond James boosted its 2001 gas price forecast to $5.75/Mcf, $1.50 higher than the consensus forecast.