Natural gas inventories, or the volume of gas periodically injected, stored and withdrawn in various parts of the US, is a major price determinant. Storage dynamics also vary significantly by region, from production centers with ample salt cavern storage capacity to demand centers like the northeast where cold winters require utilities to maintain enough supply so customers can heat their homes and businesses without interruption.

The US Energy Information Administration recently detailed factors impacting gas storage trends in different parts of the country. As we head into the fall months and prepare for winter heating season, some people may be interested to know more about one of the variables that informs natural gas prices and thus heating costs.

“Storage levels and available capacity for working natural gas, or natural gas that is used for withdrawal, respond to a different set of factors in each region:

• East region. For many states in this region, local distribution companies are legally required to purchase and store working gas to ensure sufficient inventories to meet increased winter demand. As a result, working gas storage capacity generally tends to be full in the East by the end of October, regardless of weather and market conditions. The region consistently uses close to or above 90% of its working gas storage capacity by the end of October.
• Producing region. End-of-October capacity utilization levels vary more in this region, mainly because of the prevalence of salt cavern facilities. As of December 2012, salt caverns accounted for 407 billion cubic feet (Bcf), or 27%, of the 1,522 Bcf total working gas design storage capacity in the Producing region. These facilities operate under high pressure, facilitating quick turnaround for injections and withdrawals. This enables market participants in the region to more immediately respond to short-term price fluctuations. Injections and withdrawals thus follow a more flexible schedule, causing end-of-season storage levels to vary. In the past five years, working gas storage levels at the end of October have varied from roughly 74% of available storage capacity (2008) to 92% of capacity (2009).
• West region. As in the East region, storage operators in the West use their facilities to ensure that inventories are sufficient to meet increased demand during the winter months. Also, both interstate and intrastate natural gas pipelines use Western storage facilities to support load balancing. Storage levels are relatively stable and generally lower than in the East and Producing regions, due largely to unused capacity in depleted wells in areas such as the Williston Basin that do not have easy access to areas of high demand, although they have increased in recent years. Since 2005, end-of-October working gas storage capacity utilization has been between 59% and 72%.”