Natural gas storage is down slightly as winter approaches

Natural gas storage is set to enter the winter heating season at high levels, but well below the records set over the past two years.

As a result, prices could strengthen over the winter, but only if the weather cooperates, natural gas price marketer and producer Tony Say said.

“It’s going to be a seasonal commodity where we’re going to see prices go up due to weather,” said Say, president of Oklahoma City-based Clearwater Enterprises. “Forecasts indicate we’re probably going to have a 10 to 15 percent cooler winter than last year, which is not that remarkable when you consider we had one of the warmest winters on record both last year and the year before that.”

Natural gas prices historically have been strongly seasonal and linked to weather patterns. Primarily used for home heating and for manufacturing, demand surged in the winter and tumbled in the summer.

While that general demand pattern still leads storage levels, demand increasingly has become more stable in recent years as natural gas has become a dominant fuel for electric generation and as natural gas exports have begun shipping some excess supply to Mexico and overseas.

While demand has increased, the country’s natural gas production also has grown.

“We have a tremendous capability of ramping up and making more gas available if the price is right,” Say said. “We’re not going to be running out of gas anytime soon, nor are we going to see a significant run-up in the price.”

Still, storage levels at the beginning of the November-through-March winter filling season is seen as an indicator of winter prices.

The benchmark U.S. natural gas price has hovered near $3 per thousand cubic feet for the past four months.

The country’s storage levels increased to 3.466 trillion cubic feet as of Feb. 22, according to numbers the U.S. Energy Information Administration released Thursday. The storage level is down 3.5 percent from one year ago, but up 1.2 percent from the five-year average.

Storage likely will be around 3.75 trillion cubic feet Nov. 1 when the heating season starts,

Say said.

“If we do get cold weather, we could maybe breach $3.50 this winter, but I don’t see it significantly higher than that because there is ample supply around,” Say said.

“On the low end, if we get another winter like the last two, you could easily see prices slip back to the $2.25 to $2.50 range.”