Natural Gas Weekly: October 19, 2023
Infrastructure - As of September 1, California has increased working storage capacity by 27.6 Bcf during the final weeks of the injection season. Combined with an improved outlook for pipeline flows, the additional storage could help the state avoid a repeat of last winter's volatility.
The California Public Utility Commission voted at the end of August to allow Southern California Gas to raise the maximum working capacity of the Aliso Canyon storage field by 27.6 Bcf. Located north of Los Angeles, the Aliso Canyon facility had been operating at reduced capacity since 2015 following a major methane leak. With the approval, Alison Canyon can now store up to 68.6 Bcf of working gas.
Heading into winter, the additional storage capacity could help cushion the West Coast from major price swings during bouts of cold weather. The region was hit with severe storms in the 2022-23 heating season that sent Southern California border prices spiking to over $40/MMBtu in December 2022. An outage on Line 2000 of the El Paso system contributed to the supply squeeze in the Southwest. Pacific Coast storage has lagged the 5-year average for most of 2023, and finally caught up to normal seasonal levels in late September. Pacific region storage currently sits just 3 Bcf above the 5-year average.
East Daley is monitoring the West Coast gas market through a new West Coast Supply and Demand Forecast. This new report provides an in-depth view of supply, demand and midstream flows affecting prices in the western US market. Sign up now for more information on the West Coast Supply and Demand Forecast.
Flows - Kinder Morgan's (KMI) Permian Highway Pipeline (PHP) is planning a new round of maintenance that will limit pipeline takeaway from the Permian Basin through the end of October.
In a notice to shippers, PHP said it will conduct maintenance on the Big Lake compressor station from October 22-30. The work will limit capacity on the pipeline to 1.73 Bcf/d from Sunday (October 22) through next Thursday (October 26). PHP can normally transport 2.1 Bcf/d to the Gulf Coast, so the work will result in a 370 MMcf/d egress cut. Capacity will be limited to 2.02 Bcf/d from October 27-30. PHP anticipates resuming full service on October 31.
Previous pipeline outages have caused price volatility at the Waha hub given egress constraints in the basin, including negative pricing events this year in May and July.
Storage - EIA reported a 97 Bcf storage injection for the October 13 week, well above market estimates for an 84 Bcf injection in the latest EIA survey.
Lower 48 storage inventory currently totals 3,626 Bcf, 300 Bcf greater than last year and 175 Bcf greater than the 5-year average. With three weeks left in the injection season, injections would need to average 66 Bcf/week to match East Daley's end-of-season estimate of 3,824 Bcf in the September Macro Supply and Demand Forecast.
Natural Gas Weekly
East Daley Analytics' Natural Gas Weekly provides a weekly update to our monthly Macro Supply and Demand Forecast. The update covers rigs, flows, production, prices and capacity constraints that materially change our view on supply and demand. This update highlights what investors and traders need to monitor in natural gas to ensure they are on the right side of the market. Subscribe to the Natural Gas Weekly.
