Natural gas bulls have been shellacked by plummeting prices, but now they’re worried about storage. We’re nearing the limits of our capacity to hold the stuff, which could possibly force a shutdown in wells.
FT: Energy companies have been stuffing extra gas into salt caverns, aquifers and depleted oil wells at bewildering rates. By the time winter heating demand starts to empty these reservoirs, analysts predict they will brim with record amounts of the fuel, possibly growing so full that gas backs up into pipelines.
“The outlook for US natural gas storage in the next few months is quickly approaching a trainwreck,” says James Crandell, of Barclays Capital in New York.
The prospect of not enough storage could crush US gas prices that have recently traded at seven-year lows.
So, how much room is left in storage? That’s the scary part:
“It’s not like a crude oil storage tank where you have a fixed and knowable volume,” said Tancred Lidderdale, an EIA senior economist. “For natural gas you know it’s full when you can’t push any more in.”
Via Mahalanobis, here’s the latest read on the oil-to-natural gas ratio. Check out the breakout peak on the bottom chart.
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