Northeast natural gas production will help the U.S. get underground storage levels back to and then up above the five-year average as long as the winter 2018-2019 is not too harsh, according to two gas market experts.
Speaking at the LDC Gas Forum Northeast, Meera Bagati, manager of market analysis for NextEra Energy Resources LLC, said she expected the U.S. storage levels to recover then exceed the five-year average in 2019. Jack Weixel, vice president of analytics at PointLogic Energy LLC, a division of IHS Markit's OPIS, agreed with Bagati. He said U.S. gas production, with a heavy contribution from the Marcellus and Utica shales, would catch up with gas demand and help replenish storage, "provided there is a normal winter."
The U.S. Energy Information Administration put the amount of working gas in storage at about 1.8 Tcf on June 1. Cold temperatures during the winter and a cool spring pulled inventories well below the norm. Last year, on June 1, 2017, working gas stood at about 2.6 Tcf and the five-year average is about 2.3 Tcf.
The New England states see some of the largest effects of winter weather on gas demand, but the region will have a hard time attracting incremental gas supplies because of political and market obstacles to more pipeline capacity, Weixel said. "Unfortunately, the market is not in New England," he said. "It's being pushed out to the other regions in the country."
In order to return to the regional five-year average storage level of 916 Bcf by the end of October, the Northeast will have to inject about 3.2 Bcf/d, which is about 0.4 Bcf/d greater than what was injected last year, Weixel said.
Total incremental production growth in the Lower 48 from summer 2017 to summer 2018 is about 8.8 Bcf/d, and about 5 Bcf/d of that is from the Northeast, Weixel said. There will be a slowdown in incremental production growth in 2019. It will be about 3.6 Bcf/d, with the majority of that again coming from the Northeast at about 2.9 Bcf/d, he said.
Weixel's team expected a soft price in summer 2019 between $2.25-2.50/MMBtu. "Production is going to catch up with demand, but it's going to take a little bit of time," Weixel said.
The Natural Gas Supply Association recently wrote in its outlook for the summer that U.S. oil and gas producers, particularly in Appalachia's shales and Texas' Permian Basin, will produce more than enough gas to meet the increased demand. Enough gas will be produced, primarily from Permian Basin oil wells and the Marcellus and Utica shales, to not only cover the increase in demand but also restock storage levels, according to the analysis.
