EIA sees record winter gas stockpiles

OREANDA-NEWS. June 08, 2016. US natural gas inventories should exit October at an all-time high, despite recent government data indicating that production growth is slowing.

Domestic stockpiles of the heating and power plant fuel, which can ease concerns about spikes in demand or supply shortfalls, will probably enter the winter heating season at 4.161 Tcf (118bn m?), slightly higher than the last month's projection, the US Energy Information Administration (EIA) said today in its Short-Term Energy Outlook.

The agency noted that low gas prices in March contributed to declines in marketed gas production from states such as Texas, Pennsylvania, Ohio and West Virginia. Output that month fell by 1 Bcf/d from February. But initial data indicates that production has risen slightly since March, the EIA said.

Spot prices at the Henry Hub in March fell to an average of \\$1.70/mmBtu, down by 13pc from February and 39pc lower than a year earlier. US benchmark prices have since rebounded somewhat, rising to an average of \\$1.92/mmBtu in May and reaching a five-month high above \\$2.30/mmBtu in June.

The EIA projects that natural gas production growth will flatten this year as lower prices slow the development of shale fields. Output should increase this year to 79.6 Bcf/d, up by just 1pc from 2015 and much smaller than the year-earlier increase of about 5pc.

Low prices should also stoke additional gas consumption from the US power generation sector. Electric utilities this year are continuing to substitute inexpensive gas-fired generation for coal-fired power to meet customer needs.

Gas consumption for power generation is forecast to rise this year by 5.1pc to 27.9 Bcf/d, the EIA said. In addition, industrial consumption should increase by 2.7pc as new fertilizer and chemical projects come on line.