Natural Gas: Clean Fuel with a Dirty Little Secret

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This dirty secret is not obvious, until you spend some time with the data. While natural gas demand is expected to increase by 1.42% in 2008, from 65.42 BCF/d to 66.35 BCF/d, domestic natural gas supply increased from 52.97 BCF/d in May 2007 to 57.14 BCF/d in May 2008! This is a stunning 4.17 BCF/d supply response in the midst of a .93 BCF/d increase in demand. The natural gas markets are currently 3.24 BCF a day oversupplied!...Nathan Weiss

The natural gas market has a dirty little secret: The U.S. natural gas market is currently massively oversupplied...This dirty secret is not obvious, until you spend some time with the data. While natural gas demand is expected to increase by 1.42% in 2008, from 65.42 BCF/d to 66.35 BCF/d, domestic natural gas supply increased from 52.97 BCF/d in May 2007 to 57.14 BCF/d in May 2008! This is a stunning 4.17 BCF/d supply response in the midst of a .93 BCF/d increase in demand. The natural gas markets are currently 3.24 BCF a day oversupplied!

Despite the massive growth in natural gas supply, the amount of natural gas in storage began the year 358 BCF lower than in 2007 and today is only 367 BCF lower. How can the market be massively oversupplied when storage levels are constant versus 2007? There were 152 days from January 1 to May 30. If the market was truly oversupplied by 3.24 BCF/d, we should have seen storage increase by 492 BCF. Where did nearly 500 BCF disappear to?

LNG imports have decreased significantly. From January 1 to May 30, 2007 the United States imported an estimated 377 BCF of LNG, in total. During the same time period in 2008, imports totaled 139 BCF of LNG - a level our research shows to be near the absolute minimum contracted levels. The lack of LNG imports has benefited natural gas storage levels to the tune of 238 BCF so far in 2008. This will become apparent in the headline storage data shortly...

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