As we pass the halfway point of summer the days will continue to get shorter and the nights will continue to get longer and we start to enter the harvest months of autumn. Pleasant weather that is neither too hot or too cold. The “shoulder season” for natural gas. Over the last few weeks its been quite quiet for the energy sector. The BP spill is a distant memory now as the well has been capped, there are no significant hurricane storms on the horizon (that could change) and US natural gas in storage continues to grow.
Today, natural gas in storage increased by another 37 Bcf to a total of 2,985 Bcf in storage for the week ending August 6 2010 according to the US Energy Information Adminsitration (“EIA”) weekly report. And thought stocks are 158 Bcf below last year at this time, they remain 219 Bcf above the five year average. More concerning perhaps is all the evidence that seems to point to no decline in production as we start to see the shoulder season approach, which will mean a decrease in demand as humming air conditioners in the US northeast come fall silent. Will there be a late summer heat wave… maybe. Will there be a disruptive hurricane in the Gulf… maybe.
Last year we watch natural gas in storage approach the physical storage capacity of the US. It would be too early to start raising concerns about this now, but there is a noted difference between last year and this year. While last year’s storage numbers were climbing, natural gas producers were announcing production cuts and shut ins to reduce the amount of gas being injected into the system. This year producers are pushing forward as they develop assets in order to maintain the land leases they acquired for shale gas. Producers are also under pressure to deliver strong revenues for their shareholders, and increasing production is one way to make up for lower prices and the decreased benefits of hedging. Many are starting to guide their communications towards the fact they pull up considerable oil as well, and are focusing on this revenue source.
The bottom line is this. There is an abundance of natural gas in North America, and we need to use more of it as a clean energy alternative. We keep hammering on this message in more detail here on HRN… and will contiune to do so.
