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By Eileen O'Grady
HOUSTON, March 13 (Reuters) - Utilities that rely on natural gas should be able to refill U.S. underground storage facilities over the summer, but it will not be easy after the coldest winter in 30 years has left supply at an 11-year low, a gas industry analyst said on Thursday.
Gas companies will need to inject an average of 13 billion cubic feet (bcf/d) of gas per day into storage over the summer to rebuild the nation's inventory before the next heating season arrives, said Chris McGill, vice president of policy analysis at the American Gas Association (AGA) in Washington, D.C.
McGill said refilling storage at a 13-bcf/day pace would add roughly 2.8 trillion cubic feet (tcf) to storage, giving the industry a 3.6-tcf stockpile of gas for use next winter, but less than the record pre-winter storage seen in the past five years.
The AGA estimates that the record-cold winter will leave U.S. gas in storage at roughly 800 (bcf). To reach a comfortable pre-winter level "is doable," said McGill.
Net injections in recent years have been about 10 bcf/day, according to AGA.
"It would be extremely strong compared to history, but it appears the gas is there to do that," McGill said.
A government report on Thursday said utilities pulled 195 bcf of gas from storage last week, the biggest draw for the month of March and well above historical comparisons. That leaves just 1.001 tcf in storage, the lowest storage level for this time of year since 2003.
Utilities typically stockpile natural gas from April through October and then withdraw stored supplies from November through March to help meet peak winter heating demand.
This winter was the first in five years that gas in storage did not start at a record high with stockpiles at 3.834 tcf in early November, 2 percent below 2012's all-time high of 3.929 tcf.
RECORD STORAGE A RECENT TREND
Some analysts are looking for a larger supply of gas to begin the winter - 3.8 tcf or more - but McGill noted that record gas production from shale resources only inflated storage levels to that level beginning in 2009.
"Underground storage never exceeded 3.5 tcf until October 2007," McGill said. "This is relatively new, in terms of net position for storage for the country as we enter winter."
Even with a robust injection season, "The starting point on the storage refill is so low that reaching an adequate level of storage by Nov. 1 will be challenging," said Jeff Dietert, an analyst at Simmons & Co., in a note to clients.
A key question that will affect gas prices this summer is what gas-inventory level the market requires: 3.8 tcf, the five-year average; 3.6 tcf, the 10-year average or some lower figure, Dietert said.
"Each one of these comes with a different price point in order to hit the inventory target," said Dietert, who expects gas in storage to rebound only to 3.4 tcf by the beginning of winter.
That's in line with many other analysts and the U.S. Energy Information Administration's latest outlook which forecast a fourth straight year of record U.S. gas production.
Growing production, extreme weather, gas needs for power generation and price will determine how much gas goes into storage before next winter, said McGill. "A lot has happened around our traditional view of working gas in storage, particularly in the last four to seven years," he said.
To reach the 3.8-tcf level, McGill, like many analysts, expects it to take more than one summer injection season.
"It may take two seasonal cycles to get back to 3.8 or 3.9 (tcf)," said McGill. "That seems reasonable based on my experience."
(Additional reporting by Scott DiSavino in New York; Editing by Stephen Powell and Lisa Shumaker)
((eileen.ogrady@thomsonreuters.com)(+1 713 210 8522)(Reuters Messaging: eileen.ogrady.thomsonreuters.com@reuters.net))
Keywords: ENERGY AGA/STORAGE
