Swelling US midcontinent natural gas inventoriesheading into a potentially mild winter could weigh on the region's prices.
Temperature forecasts for the Great Basin region will be near average to above average into the beginning of January, the National Weather Service said. Above-average temperatures would curb demand for gas-fired heating during peak winter months, stalling gas prices in a region where record high output has created plentiful supply.
Natural gas production in the Bakken shale basin, which includes several North Dakota counties, is forecast to reach 3 Bcf/d in November and increase by 15 mn cf/d in December, according to the US Energy Information Administration (EIA). That would be a continuation of record high production for the basin during the heating season, when prices are historically at their highest.
By the end of November total storage inventories for the Midwest region were 1.04 Tcf, 0.5pc larger than the five-year-average and about 13pc higher than a year earlier.
Higher than normal stocks helped keep midcontinent gas prices low into the beginning of November, the beginning of withdrawal season, setting the stage for bargain buying for the winter season and possibly into next year.
The EIA expects US storage withdrawals to total 1.9 Tcf from the end of October to the end of March, which is less than the five-year-average winter withdrawal. A withdrawal of that size would leave end-of-March national inventories at almost 1.9 Tcf, 8pc above the five-year-average.
US production in 2020 will likely slow as low prices at the end of 2019 may reduce natural gas drilling in the first half of 2020. But slower production may do little to help prices rebound if demand remains low and inventories stay high into the 2020 injection season.
At least two pipelines are expected to be finished in 2020 for the midcontinent region, according to the Federal Energy Regulatory Commission. While the new pipelines are too small to increase demand meaningfully, they will slake the thirst of a few more buyers who cannot easily get gas from the midcontinent, Canada, Appalachia or storage.
The $31mn Lakeshore Capacity project will add approximately 9 miles of interstate pipeline in southern Wisconsin. Milwaukee based utility holding company WEC Group is building the project and the accompanying Lakeshore Lateral. The work is expected to be completed by October and have an anticipated capacity of about 232mn cf/d (6.5mn m³).
Another project, the Saginaw Trail pipeline, will be built in four phases by Michigan utility Consumers Energy. The line will have a capacity of 211mn cf/d and will replace 78 miles of existing pipeline with 94.4 miles of new pipe for around $610mn when completed in the winter of 2020-2021.
With only a few patches in the midcontinent region unable to reach storage, the two additional pipelines brought on line to reach market areas in the upper Midwest may be inconsequential for prices in a region that already has access to plenty of natural gas.
By Taylor Zavala
