US Midwest working gas storage volumes near all-time high as injections linger

Midwest working natural gas stocks stand just below the all-time high while lower demand on the horizon likely to depress local prices as other US storage regions shift closer to the five-year average.

Midwest region storage sits at 1.127 Tcf, which is only 28 Bcf behind the all-time high of 1.155 Tcf set in November 2016, according to the US Energy Information Administration. While modeled estimates suggested small withdrawals to start November, the region is now averaging a net injection of 2.7 Bcf/d this month, which contrasts with a net withdrawal of 800 MMcf/d last year, a 3.5 Bcf/d swing year over year, according to S&P Global Platts Analytics.

Inventories in the Midwest typically peak Nov. 8, but this year it has already pushed past that date. With demand in the region expected to be lower than normal the next two weeks, peak inventory could still be yet to come before the flip to the heating withdrawal season.

Over the first two weeks of November, Midwest demand has averaged 11.2 Bcf/d, 6.1 Bcf/d below this time in 2019 as temperatures averaged 13.8 degrees above 2019. Through the end of November, Platts Analytics expects the region to average 9.6 degrees above 2019. This should bring demand up to 13.9 Bcf/d. Although this is an increase from the first half of the month, it is 4.6 Bcf/d below this time in 2019.

Exacerbating this lower demand is the possibility of rising net pipeline inflows compared to what has been observed so far this month. Month-to-date net flows to the Midwest have averaged 11.3 Bcf/d, 2.9 Bcf/d below 2019. The difference has primarily come from Oklahoma as well as West Canada and the Rockies.

Pipeline flows from Oklahoma are down 995 MMcf/d from this time in 2019. The region has held onto gas this month as lower production this summer decreased injections into storage. Platts Analytics expects flows from Oklahoma to remain steady at 2.9 Bcf/d the rest of the month.

Month-to-date Rockies flows to the Midwest have also dipped 720 MMcf/d year over year to 923MMcf/d on the back of lower production in the region and increased flows to the US Pacific Northwest. Platts Analytics expects inflows to rise the rest of the month to an average of 1.1 Bcf/d. Also, imports from West Canada dipped 668 MMcf/d.

Alberta’s AECO hub dipped to a discount to Chicago while West Canada has injected more gas into storage. This brought down Midwestern US. Like the Rockies, however, Platts Analytics expects West Canada to Midwest exports to climb to a monthly average of 3.5 Bcf/d.

The potential increase of 598 MMcf/d of supply from West Canada and 207 MMcf/d from gas fields in the Rockies will only add further length in the Midwest the next two weeks.

Overall, lower regional demand and steady supply of pipeline gas into the region may place additional upward pressure on Midwest storage. Chicago cash basis hit 64 cents/MMBtu below Henry Hub on Nov. 10. Chicago cash basis rebounded to minus 17 cents/MMBtu on Nov. 16. However, it is likely to see downward pressure this week as will other price hubs in the region. Weaker prices will be needed to decrease inbound flows to the region or to push the surplus of gas to the US Gulf Coast.
Source: Platts