The most powerful influence on the value of natural gas storage in North America is the difference between the average winter price in the forward curve, versus the average summer price. Seasonal natural gas supplies are stored in the summer and withdrawn to meet winter demand. The wider that spread, the more the market is willing to pay for storage.
Back in the 2005 timeframe, storage values were very high, which encouraged the construction of many new storage facilities. At the same time, shale gas production was increasing rapidly, and those additional supplies weighed on the value of gas held in storage. Combined with all the new storage facilities, the result was an infrastructure overbuild, resulting in a virtual collapse in storage values, with the winter-summer differential falling to about $0.30/MMbtu from 2013 until 2022.
But in 2023, the combined impact of weather market disruptions, rapid growth in LNG export capacity, and demand for wind/solar backup supplies has fired up the demand for storage capacity. That in turn has pushed the value of storage higher, bringing the winter-summer differential back to where it was in the 2005-2010 period. At the first of this year, it hit $0.84/MMbtu, is now up to $1.00 and averages $0.80MMbtu in the forward curve for the next seven years. Natural gas storage is back.
