The volume of natural gas in storage and the flow of gas into and out of it are among the most closely watched indicators in the U.S. gas market. That makes sense, given that these numbers provide important weekly insights into the supply-demand balance, gas price trends, the impact of LNG exports, and any number of other market drivers. However, what’s often ignored by those not involved in the day-to-day physical gas market are the mechanics and economics of storage itself. Who uses gas storage, and for what purposes? What are the value drivers for a storage facility? Why are there different types of gas storage contracts? How much does storage cost, and what do storage rates reflect? Today, we explore these and other questions.
Blank Space
Thursday, 8/05/2021
If you’re a relative newcomer to the energy industry, the subject of natural gas storage might make your eyes glaze over — the sector is often treated as a backwater by traders and investors focused on liquid hydrocarbons. But it wasn’t always so. In the decades leading up to the early 2000s, the U.S. gas market underwent a series of fundamental changes, each spurring the development of new storage capacity, first in the Northeast, then the Midwest, and finally along the Gulf Coast. Along the way, the primary use of storage — balancing seasonal swings in gas demand — remained consistent, but there was also a wild-and-woolly period in the mid-2000s that was rife with meme-stock-like trading frenzy. It’s hard to say for sure, but we may be on the verge of needing still more gas storage capacity. In today’s blog, we’ll discuss the history and nature of U.S. natural gas storage to give context on what the future might hold.