Yesterday (November 19, 2015) the Energy Information Administration (EIA) published its first official weekly natural gas storage report in its new five-region format indicating an injection of 15 Bcf over the past week for a total U.S. inventory of exactly 4 Tcf. The new methodology and reporting format is a vast improvement in the granularity and clarity of government natural gas storage inventory data. But it also potentially moves the target for the slew of industry analysts who lose sleep trying to predict it each week. How the changes impact EIA inventory data and the ability of analysts to predict that data will become clearer in the coming weeks and months. But we got more clues this week as the EIA released dual versions of last week’s report on Monday showing significant differences leading up to launch of the new report on Thursday. Today we compare the results of the old versus new methodology.
We first alerted our readers to EIA’s plans for its methodology changes back in June, in our Breakdown blog series. In Part 1, we covered the critical role of EIA’s Weekly Natural Gas Storage Report as the most important fundamental indicator in the natural gas market. The weekly data quantifies changes in natural gas storage inventory from the previous week on a national and regional level. The change in inventory 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 report to understand whether 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. There is also a cottage industry around predicting what the EIA will report each Thursday morning (see Trials and Tribulations of Predicting the EIA Natural Gas Storage Number). Gas traders often react as much to the difference between expectations and actuals as to the outright EIA numbers.
As detailed in Part 1, the EIA collects storage activity data by region via a survey of a sampling of storage operators using EIA Form-912. The EIA then estimates the activity/inventory for the fields that are not in its sample (non-sample facilities) using historical data from its monthly survey. Since the inception of the weekly storage report in 1993, the EIA has used three macro regions: East, West and Producing. But as of this week’s storage report, EIA officially launched a new five-region breakout, redrawing the boundaries of the storage regions. What was the old East Region is now split in two: East (navy blue area in Figure 1) and Midwest (green area). The old West Region is now split in two as well: Mountain (baby blue) and Pacific (purple). And the old Producing Region is mostly intact but is renamed the South Central Region (brown). The map also shows the distribution of storage fields by type across the new regions: salt domes (white triangles), depleted fields (blue circles) and aquifers (red squares). We’ll get back to those in a bit.
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