For natural gas markets to operate as efficiently as possible, a lot of data is needed, including up-to-date estimates of the amount of gas in storage and the physical capacity to hold it. For too long, Canadian natural gas markets have been operating with an obvious blind spot: little to no reliable storage data. With Alberta being home to the largest amount of gas storage capacity in Canada, having accurate information could provide vital data in the pricing of Canadian natural gas. In today’s RBN blog, we begin a multi-part series examining Canadian natural gas storage, starting with Alberta.
Having an accurate reading on the amount of natural gas held in underground storage is a primary ingredient in the functioning of gas markets and the prompt and future pricing of this important commodity. If natural gas storage levels are deemed by the market to be too high, then prompt and future prices will likely pull back to incentivize more demand, discourage production and slow injections of gas into storage sites. The opposite is true when the amount of gas in storage is considered too low: prompt and future prices will rise to encourage more production, reduce demand and increase injections. The market’s general goal is an iterative process to ensure that an adequate amount of gas — but not too much — is socked away ahead of the high-demand winter months.
This tricky balancing act also requires at least some data concerning the amount of available gas storage capacity at any given time. The mechanics of this balancing act have been discussed over the years in the RBN blogosphere, with Under the Weather, The Long and Winding Road, Summertime Blues and Breakdown, It’s All Right acting as useful primers on the U.S. gas storage industry and how the total amount of gas held in storage can be an important influence on the prompt and future price of natural gas.
In the U.S., monthly data on the amount of natural gas storage capacity and gas held in storage has been collected by the Energy Information Administration (EIA) since 1975. More timely data on gas storage levels was initially released by the American Gas Association on a weekly basis beginning in late 1993, with the torch for gathering and releasing the weekly data eventually being passed to the EIA in early 2002, which it carries to the present day.
Those weekly and monthly reports from the EIA contain useful information such as the amount of gas held in storage, referred to as working gas. In addition, data on the amount of gas storage capacity available for that working gas — logically referred to as working gas capacity — as well as the amount of gas held at each storage site to meet minimum pressure and operating requirements — referred to as base gas or cushion gas — is published by the EIA on an annual basis for every commercial gas storage site in the U.S. Additional tidbits such as each site’s maximum withdrawal capacity are also available. If you are an avid follower of natural gas storage, you know this information all too well as it is routinely scrutinized in terms of setting prices and price direction for natural gas each day, especially now that an increasing number of U.S. gas storage operators and gas pipeline companies also provide daily, site-specific data on storage levels and withdrawal/injection activity.
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