The biggest fundamental price indicator in the natural gas market -- Energy Information Administration’s (EIA) Weekly Natural Gas Storage Report – is about to get a major makeover. The EIA is planning to split the US gas inventory data into five regions, from three macro regions currently. The idea has been floating out there for a while, but now it looks imminent, with a good chance it is rolled out before the gas winter season comes around in November. When it does happen, the increased granularity will vastly improve the transparency of natural gas storage inventory data on a weekly basis. But there’s another reason it will be a big deal when it happens: It will break everybody’s storage scrapes and models. Storage modelers and forecasters will have their work cut out for them. In today’s blog, we break down the upcoming changes.
EIA’s weekly gas storage report, which quantifies changes in natural gas storage inventory from the previous week, is easily the most closely watched piece of fundamental data in the US gas market. The weekly inventory number, which is reported on a national and regional level, reflects the tension (or lack thereof) between supply and demand, and has a big impact on price sentiment (see Catch a Hydrocarbon and The Signal and The Noise). The market tunes in each Thursday morning at 10:30 AM EST for the release of the storage inventory data to determine if the supply demand balance is loosening or tightening, relative to history and also relative to expectations, and a flurry of trading activity usually surrounds its release. As such, an entire cottage industry of forecasters at banks, trading shops and analytics companies exists around predicting what the EIA numbers will be each week (see Trials and Tribulations of Predicting the EIA Natural Gas Storage Number). Their models are built to predict what the EIA will report and, after the fact, the data is treated as the benchmark by which to recalibrate supply demand models. These models typically are built to emulate the EIA storage regions and then aggregate up to the total US. Thus, changes to the EIA report will change not only the mechanics of how the models ingests and aggregate the data but also the assumptions and calculations behind them.
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The EIA currently collects (via a survey of storage operators using EIA Form-912) and reports storage inventory data from a fairly large sample of operators in three macro regions: East, West and Producing. The map in Figure 1 shows how each of these regions is currently defined. The table below the map lists the states in each region. The East Region (darker blue area) comprises 28 states, including the Atlantic Seaboard, Appalachian, New England and Great Lakes states. The West Region (lighter blue area) incorporates 13 states across the US Southwest, Rockies and West Coast. The Producing Region (orange area) is the eight states that historically supplied the majority of the natural gas to the US, hence the name.
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