What is the outlook for U.S. natural gas inventories at the end of injection season

In-depth analysis

August 7, 2024

In our latest Short-Term Energy Outlook, we forecast that U.S. working natural gas inventories will be 3,954 billion cubic feet (Bcf) by the end of October, the most natural gas in U.S. storage since November 2016. We forecast less-than-average cumulative injections for the rest of the injection season (through October) because inventories were relatively well supplied in March and because we expect more U.S. consumption of natural gas than average this summer and relatively flat natural gas production.

With this slower rate of inventory builds, we forecast that the difference between U.S. natural gas inventories and their previous five-year average will gradually decrease, from 39% above average in March to 6% above average in October. We forecast that injections into storage will be at or near the five-year minimums in every region of the United States for the remainder of the injection season.

At the end of March 2024, at the time of year when natural gas inventories are often at their lowest, U.S. natural gas inventories were relatively well supplied. Since then, net injections into U.S. working natural gas storage totaled 1,004 Bcf through the end of July, or 17% less than the average from March through July over the previous five years (2019-23).

How do natural gas storage patterns differ across regions?

Working natural gas inventories in the United States follow a seasonal pattern, generally increasing from April through October, which we consider the injection season, when natural gas consumption is relatively low. Inventories decrease from November through March, the withdrawal season, when natural gas consumption is relatively high. However, in the South Central region, where more natural gas is stored than in any other region, we occasionally see withdrawals of natural gas in the summer. Some of the nation's most flexible storage capability is located in the South Central region's salt caverns, which can be drawn down quickly. The South Central's unique seasonal pattern has become more prominent as the use of natural gas for electric power generation has increased in Texas and surrounding states.

How is U.S. natural gas storage capacity used throughout the year?

Underground working natural gas storage capacity in the United States totaled approximately 4,796 Bcf as of May 2024. About one-third of the United States' underground storage capacity is located in the South Central region, which stretches from Texas and Kansas to Alabama. The Midwest accounts for 26% capacity, and the East accounts for 23%. Storage capacity in the Mountain region, the Pacific region, and Alaska combined make up the remaining 19%.

Natural gas storage is primarily used to balance seasonal fluctuations in natural gas demand because although natural gas production is relatively stable throughout the year, natural gas consumption peaks in the winter when natural gas use for space heating is greatest. Natural gas storage can also help balance sudden drops in production, such as during the February 2021 winter storm.

As summers have gotten warmer and natural gas-fired generation capacity has increased, natural gas consumption in the electric power sector has increased to meet air-conditioning demand, developing a second, smaller peak in the year, typically in July or August. Much of the increased U.S. natural gas demand since 2012 has come from the southern United States, including Texas and Louisiana. The second peak in consumption in the summer shows up in the inventory pattern in the South Central region as another prominent withdrawal period.

What are the different types of natural gas storage?

The United States uses three main types of natural gas storage : depleted natural gas and crude oil fields, aquifers, and salt caverns. Most storage facilities converted from depleted natural gas or crude oil fields are in the East, and aquifer storage facilities are predominantly in the Midwest. Natural gas is also stored in salt cavern storage facilities in the South Central region in naturally occurring salt dome formations located in Gulf Coast states.

Injection and withdrawal capabilities differ among the types of storage and are typically dependent on the pressure level inside the storage formation: generally, the more natural gas that is in storage, the higher the pressure and the higher the withdrawal rate. However, salt caverns have more flexibility for withdrawal and injection relative to their capacity and so can be used to meet sudden increases in demand.

How is the South Central storage region different from other regions?

Of the 486 Bcf of salt cavern storage capacity in the United States, 479 Bcf is located in the South Central region. More flexible salt caverns account for 30% of working storage capacity in the South Central region. Natural gas storage in the South Central region can deliver as much as 53.0 billion cubic feet per day (Bcf/d), the most of any storage region. Maximum deliverability in the other four U.S. storage regions and Alaska ranges from 0.3 Bcf/d to 27.9 Bcf/d, according to our survey data.

In addition, more liquefied natural gas (LNG) exporting capacity is located in the South Central region than in any other region in the United States. Operators in the United States began exporting LNG from the Lower 48 states in 2016, and now 10.8 Bcf/d of baseload LNG export capacity is located in the South Central states along the Gulf Coast.

Because of its flexibility and proximity to LNG terminals, South Central storage capacity is used to help manage fluctuations in natural gas deliveries to LNG terminals. For example, during times of maintenance or operational disruptions at LNG terminals and less domestic consumption, natural gas is injected into storage until demand increases. Similarly, during periods of extreme heat in the summer and corresponding demand for air conditioning, natural gas is withdrawn quickly from storage and consumed in power plants to meet demand for electricity.

At the end of March 2024, 38% more working natural gas was stored in inventories in the South Central region than on average over the previous five years (2019-23). Injections into natural gas storage so far this injection season in the South Central region have been below the five-year average, although we expect them to follow a similar pattern to the past several years, with withdrawals in both July and August.

Principal contributors: Corrina Ricker, Katy Fleury
Data visualization: Corrina Ricker

Tags: STEO (Short-Term Energy Outlook), forecasts/projections, natural gas, inventories/stocks, weather

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