Random data – Storage vs TDD – Jan 21, 2020

Difference in storage vs 5 yr average storage – weekly provided by RonH

The above is the difference between storage and 5 yr average storage. In 2015 existed a deficit in comparison to the 5 year average. During 2015, the storage deficit turns into a surplus in 2015/2016. A similar occurrence is happening now in 2019/2020.

Another way to look at this is to compare each build/draw to the each week of the 5 year average. This, to me, shows the consistency in build/draw of storage vs the average.

Weekly build/draw difference vs 5 year average – provided by RohH

HDD during 2015/2016 vs Long Term HDD averages provided by RonH
TDD during 2019/2020 vs Long Term TDD averages provided by RonH

I didn’t see TDD for 2015/16, so I am looking at HDD only. The significant swings in HDD and TDD can be see in storage around the same weeks for each year. I’m looking at this to get a comparison to the 2015/2016 plunge in pricing and compare that to storage. The dynamics of storage are what create swings in the market. The anticipation of over/under supply. Weather is the largest contributor to swings in demand, and swings in storage. Thanks to the colder than normal weather in Nov/Dec of 2019, storage kept fro building as fast as Dec of 2015.

It is impressive to me how similar a path pricing and storage is on track to compete with 2016. Prices could very well travel to $1.61 again as in 2016. I remember getting into trading ETFs around the week that NG prices bottomed out in 2016. At that time, I barely had an understanding of this market and what it was capable of. That being said, I can’t say right now feels any different for the better or worse. I know not to try and call bottom, and I know to be happy I’m not holding UGAZ, barf….

I get it now… Salt and Deliverability

For the last few years I’ve heard this argument about South Central Salt Storage. South Central is a region of the US for Natgas storage and Salt would narrow it down even closer to salt caverns. The south is a dominant area for Natgas flow and any disruption in storage could potentially cause a disruption for much more than just this single region. As we’ve seen in the Permian lately, Natgas pipeline infrastructure capacity can become limited. So the argument goes, Supply/Demand has grown substantially in the last few years yet storage capacity remains the same. Even though production has surpassed (what I would call) structural demand by upwards of 3Bcf/d lately, Salt storage is presently 48% full.

Natural Gas Storage Dashboard – EIA.gov

We see that salt is hardly keeping up with filling capacity when compared to other regions of the US. Back to the argument that it is not filling enough; therefore come winter, this region of storage could run out. When comparing supply and demand on the national level, this year is beginning to look like we will not possibly run out of storage, even in the midst of a cold winter. If one of these 7 major regions were to run out of gas, we would have that similar problem that Permian is having right now with getting rid of supply. There just is not enough pipeline capacity in all directions to move gas where we want when we want, which is the point of having enough capacity in each region. Granted, 5 year minimum for Salt storage has not dropped below 108Bcf, the last time this region experienced much in the way of a cold winter was 2014. At that time supply and demand were both much lower and the infrastructure at that time may have been more up to the task of moving gas more on demand.

I’m going to end this by sharing an article written by a reservoir engineer, posted on Oilprice.com Dwayne Purvis, makes a strong argument for the need for greater storage capacity. This is a test article so expect many mistakes and biased opinions.

https://oilprice.com/Energy/Gas-Prices/Natural-Gas-Prices-Poised-For-Dramatic-Price-Increase.html