High US gas stockpiles seen this spring: EIA
OREANDA-NEWS. November 12, 2015. US natural gas stockpiles should exit the winter heating season at above-average levels, potentially leading to low prices and high gas consumption next year.
Domestic gas inventories, which can ease concerns about spikes in demand or supply shortfalls, are forecast to exit winter on 31 March at 1.862 Tcf (53bn m?), 15pc above the five-year average, according to the US Energy Information Administration's (EIA) Short-Term Energy Outlook.
Inventories at the end of October tied the all-time high of 3.929 Tcf reached in November 2012 and should surpass that level when the EIA releases fresh inventory data later this week.
"Inventories could reach 4 Tcf in November for the first time ever, especially if above-normal temperatures reduce home heating demand," EIA administrator Adam Sieminski said.
The EIA is projecting a smaller-than-average drawdown because of forecasts for a mild winter.
Spot gas prices at the Henry Hub recentlyplumbed three-year lows below \\$2/mmBtu on high production, rising inventories and slow start to the heating season. In addition, a backlog of wells in the Marcellus shale and new pipeline projects intended to provide an outlet for stranded production in the northeast should support output growth and limit price gains.
Elevated inventories this spring should weigh on prices. Spot prices at the Henry Hub should average below \\$3/mmBtu through mid-2016, supporting gas use by the power generation sector. Power sector demand is forecast to rise by 17pc this year to an all-time high of 26.1 Bcf/d but should retreat by just 1.2pc in 2016.
The EIA said it expects marketed gas production growth to slow next year, increasing by 2pc to 81.2 Bcf/d, amid low prices and a decline in drilling. Spot prices in 2016 at the Henry Hub are projected to average \\$3/mmBtu, up from an estimated \\$2.69/mmBtu this year.