Capstone Energy Services


Midwinter Evaluation of Natural Gas Storage Inventories

February 14th, 2013

OMAHA (Capstone Energy Services) – Natural gas prices this February are more than 35% higher than they were last year — $3.32/MMbtu vs. $2.43/MMbtu. One reason often cited for the higher prices is the storage withdrawals this year are much greater than last year. Beginning with the EIA Storage Report for the week ending November 30, 2012, the inventory balance dropped below the previous year and the gap compared to last year continued to widen as the winter progressed to more than 200 Bcf. A closer look will show that these storage concerns may not be as justified as they might seem.

The winter of 2011-2012 was the warmest on record, reducing the heating load well below all expectations and severely reducing the gas storage withdrawal requirements. The 2011-2012 seasonal withdrawal was more than 200 Bcf less than the lowest recorded withdrawal in the last 15 years. It is no surprise, then, that this winter’s withdrawal, so far, is much higher than last year. In fact, when compared to the five years prior to last year, this year’s withdrawal to date is less than all of them:

Seasonal Withdrawal







As of February 1 (Bcf)








The current inventory balance of 2,684 is 204 Bcf less than last year; however, it still exceeds the highest previous Feb 1 balance by 113 Bcf. If  the end of the season (April 1st ) balance is projected using the highest, lowest and average withdrawal totals over the last 15 years, it still remains well within the five year averages (see the graph below). In fact, the worst case scenario only reduces inventories to 44 Bcf below the five year average on April 1st as show in the following table:


Projected End of Winter

2013 April 1



Inventory Balance


5 Yr Ave.


5 yr. Ave.


 (Low Withdrawal)






 (High Withdrawal)






(Average Withdrawal)







Furthermore, the only reason the worst case scenario falls below compared to last year’s 2008-2012 five year average is because the average is inflated. Last year’s record volume raised the five year average by nearly 200 Bcf.

There are no indications, at this time, that the Feb. and Mar. withdrawals will be unusual. The National Weather Service projects that temperatures will be normal to above normal for the period in the major gas consuming regions of the country. In addition, with prices above $3.00 per MMbtu, natural gas displacement of coal for electric generation, as occurred last year, will not occur due to the poor economics. Assuming withdrawals for the balance of the winter season are about average, the ending inventory balance will approach if not exceed 2,000 Bcf, still the highest volume recorded other than last year.

This evaluation suggests that natural gas storage inventories may not be a significant concern at this time. As a result, prices should begin to decline as the winter progresses, perhaps dropping below $3.00. However, concerns about summer heat and gas fired generation will limit the extent and the duration of the price decline.


By Ed Freeman

Glossary Terms

Glossary Terms

Nominated Volume

The physical quantity of gas requested, typically in MMBtu/day, for a specific contract or for all contracts at a specific point.

Marketing Affiliate

A marketing company that has corporate ties to an interstate pipeline, an intrastate pipeline, or a local distribution company.

Energy Only Providers

Power marketers or other electricity vendors who provide and bill for only the energy component of the electricity consumed by the end-use customer.


A unit of heating value equivalent to 100,000 British thermal units (Btu).

Real Power

The component of electric power that performs work, typically measured in kilowatts (kW) or megawatts (MW)--sometimes referred to as Active Power.

Injection (Storage)

The process of delivering natural gas into a storage field for future delivery and use.

Price Ceiling

Statutory maximum lawful prices for various categories of natural gas, including gas destined for both the intrastate and interstate markets.

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