Natural gas in storage at highest level for this time of year

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Latest Oil and Gas News: 
March 23, 2012

(Wall Street Journal; March 21) - Natural gas production has hit a new pressure point: The U.S. is running out of storage space. Gas output has reached record levels in recent months, thanks in large part to expanding shale gas flows and the warm winter that has reduced the amount of gas needed to heat homes and offices. That has filled U.S. gas storage to almost 58% of capacity.

With forecasters anticipating a mild summer, reducing the need for air conditioning, and fields continuing to pump gas, many market experts anticipate storage facilities will fill up by the end of October. "It's like two trains coming together on the same track," said Alan Armstrong, chief executive of the gas-and-liquids, pipeline-and-storage company Williams Cos.  That's bad news for producers, which would likely be forced to cut prices to unload their gas, and possibly stop production altogether if inventories fill up.

Gas in storage now is at its highest ever for this time of year. Usually, inventories drop considerably in winter, then build up again over the spring and summer, when less gas is used. Still, some market observers say storage is unlikely to reach capacity. Prices are likely to remain low, they say, and that will drive more power producers to switch to burning gas instead of coal.

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