US Pacific coast natural gas storage volumes on pace to finish season strong

US Pacific coast natural gas storage volumes on pace to finish season strong

Natural gas storage volumes in the US West Coast will likely tell two tales during this summer’s injection season as the Northwest currently holds above-average levels of storage and a strong hydroelectric forecast while curtailments in Southern California and lower hydro output could drive up prices later in the season.

Southern California Gas Company storage fields erased the deficit to the five-year average during May as weak demand allowed injection rates to pick up significantly. Inventories sit at 65 Bcf, marginally above the five-year average and 10 Bcf, or 20%, greater than last year, according to S&P Global Platts Analytics.

May demand is averaging 1.88 Bcf/d, 270 MMcf/d lower than last May and 370 MMcf/d weaker than April, allowing for larger injections. SoCal Gas storage fields added 11 Bcf in May, up from 2 Bcf added in April, despite ongoing maintenance events curtailing inflows through the SoCal Gas system.

Assuming balance-of-summer injections remain in line with five-year averages, Platts Analytics estimates inventories could increase by 17 Bcf, lifting end-of-season storage to 82 Bcf, nearly 5 Bcf more than than last year.

However, maintenance at the Topock/Needles receipt area is expected to begin June 1 and extend through late July. Curtailments may place upward pressure on pricing depending of how demand responds. However, Aliso Canyon inventories are available to help mitigate system reliability concerns and prevent the frequency and magnitude of price blowouts this summer.


California’s lack of precipitation this year could place more pressure on gas demand. CAISO’s hydroelectric generation output has averaged 62 GWh/d month to date, a 42% decrease from last year’s output as a lack of precipitation this year has lowered hydro generation’s market share.

Hydro’s market share averaged 11.6% in May, a decrease of approximately 9 percentage points. However, gas-fired generation share has only marginally increased year over year, averaging 17% in May, less than 1 percentage point stronger than May 2019, according to Platts Analytics.

However, with gas-fired generation demand likely to pick up in California as stay-at-home orders associated with the coronavirus pandemic are lifted pricing should continue to experience upward pressure.

The water supply situation is vastly different for the US Pacific Northwest where the Dalles Dam reservoir is currently at 105% of normal for April through September, up from 96% at this time last year, according to the Northwest River Forecast Center. The forecast has been 100% or higher since May 5 and has not fallen below 95% since February. That is in stark contrast to the California hydro situation where the Shasta Dam water supply forecast is at 66% of normal for April through July.

The Dalles Dam water supply forecast continues to sit above normal as generation output at the hydro plant rises with increased inflows into the reservoir, further pushing down power prices across the region.

Canadian exports into the Pacific Northwest are also on the rise. Net exports to the US have increased to 4.4 Bcf/d, 1 Bcf/d above the May average, according Platts Analytics. The rise was led by a 200 MMcf/d increase in exports to the Pacific Northwest.

In northern California, Pacific Gas & Electric storage field inventories are pacing slightly above the five-year average this injection season. The withdrawal season ended with 132 Bcf in storage, or more than twice the total in 2019, according to Platts Analytics.

Inventories are forecast to enter the withdrawal season at 197 Bcf, which would be 2 Bcf more than the five-year average. The balance-of-summer strip contract for PG&E city-gate has averaged 69 cents/MMBtu in the past week and may slide in the coming months as storage continues to climb.

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