Pacific natural gas reserves drop to lowest level in 13 years, gearing up for high summer prices

Sub Levels

Storage facilities in the U.S. Pacific end the winter withdrawal season with the lowest levels of natural gas inventories in more than a decade, in contrast to regions outside the continental 48 countries, according to an East Daily Analytics analysis. I set foot in

In early 2023, the weather turned out to be seasonally mild across much of the United States, but severe winters in parts of California and neighboring states created above-average demand in the West. At the same time, pipeline restrictions and maintenance events have curtailed the flow of natural gas into the region, limiting supply.

Working gas inventories in the Pacific fell to 72 Bcf in mid-March, according to Energy Information Administration (EIA) data. This was the lowest weekly regional estimate through 2010, according to East Daley analysts. As of April 7, his latest EIA reporting period, the region had 74 Bcf in stock, which is 57.5% below his five-year average.

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“According to National Weather Service data, cumulative gas-weighted heating degree days through the end of March were 16 percent above normal in the Pacific region, resulting in higher demand for heating and power generation,” said East Daley. says.

“Low inventories will drive demand from local utilities to restock storage for next winter,” analysts said, putting pressure on prices in the region this spring and summer. The last significant storage rebuild in the region occurred in 2019. If storage facilities replenish at the same pace this year, regional inventories should return to normal seasonal levels by October. ”

However, that could prove difficult given supply restrictions, making it more likely that prices will rise over the coming months. “Operators in basins that supply water directly to the West Coast, such as the Permian Basin, Rocky Mountains and western Canada, stand to benefit the most,” East Daly analysts said.

California’s hydropower could benefit from a thaw in the spring after years of drought, but natural gas prices have pushed utilities to buy large amounts of gas to meet customer needs. It shows that you are passionate about doing it.

Cash prices in SoCal Citygate earlier this week topped $8.00/MMBtu, more than triple the national average.

maintenance mayhem

Importantly, the California and Southwest regions rely heavily on Permian-generated gas from western Texas and New Mexico. However, significant interruptions in pipeline flow will limit supply.

El Paso Natural Gas Pipeline (EPNG) returned Line 2000, which had been shut down since the explosion in August 2021, to full operation in January. Its return has provided pipeline capacity of over 0.5 Bcf/d westward from Arizona to Southern California.

As EPNG conduit volumes dwindled, Southern California utilities were forced to draw large amounts from storage to meet demand. The revival of Line 2000 eased price pressure, but in February Southern California Gas (SoCalGas) announced that Line 235 required safety-related repairs. An unusually cold, snowy winter has left Pacific supplies volatile and prices relatively high.

Well, the April maintenance event is a complicated matter.

At some point earlier in the month, Permian Highway Pipelines (PHP) reduced its available capacity to replace valves connecting Kinder Morgan’s (KMI) Tejas Pipeline. Additionally, Gulf Coast Express (GCX) reduced system capacity last week for repairs and upgrades.

Then on Monday, Southern California Gas Co. began planned pipeline rehabilitation on Line 5000, which is set to last until April 28, capping the EP-Ehrenberg/NBP-Blythe subzone capacity by 630 MMcf/d. . SoCal Citygate spot prices surged 92.0 cents to $8.390 on Monday, according to NGI data.

Analysts at Wood Mackenzie said Permian repair projects will also affect prices near home. If maintenance work restricts the flow of gas to the West or South, it could create an oversupply and hit prices in West Texas hard.

“The last time PHP and GCX experienced significant flow restrictions, Waha prices plummeted,” notes an analyst at Wood Mackenzie. “In late October 2022, GCX capacity dropped from 2 Bcf/d to 1 Bcf/d and cash Waha dropped from $2.87 before maintenance to -$1.17 during the event. PHP’s capacity plummeted from 2.1 Bcf/d to 1.1 Bcf/d during the week, while Waha’s spot price averaged $0.64 over the first four days of the event, down from $3.21 before maintenance. rice field.”

Waha prices averaged $1.425 on Monday, the lowest spot price in the 48 continental US countries.

South Central stocks reached 929 Bcf for the week of 7 April. This is 35% above his five-year average and represents the highest level of inventory of any region in the country.

As of April 7, Lower 48’s total working gas inventory was 1,855 Bcf, 19% above the five-year average, according to EIA.

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