The Energy Information Agency released its weekly estimates today for natural gas storage and the results are interesting. Persistent cold weather in the northeast and
Traders watch the 5-year average closely. Until the beginning of 2009, the years 2003 – 2007 comprised the 5-year average. This average reflected an abnormally low figure because of the year 2003. Natural gas storage that year was the lowest in history and many worried that there would not be enough gas to see the
Data for 2003 dropped off in January with 2004 – 2008 comprising the new 5-year average. Since the new 5-year average isn’t skewed by an abnormally low year, we now see a more realistic representation of natural gas production and consumption.
Production of natural gas is higher than in previous years because of the many horizontal shale wells drilled the past couple of years. Everyone also agrees that manufacturers have cut back on their use of natural gas. It is interesting that even with increased natural gas production and deep cuts in demand because of the recession that we only have 17 BCF more natural gas in storage than the 5-year average.
Drilling, along with the price of natural gas, has taken a plunge and supplies are destined to follow the same trend. If the country experiences another cold winter next year, we are likely to see natural gas selling for $20 per MCF.