Underground stockpiles of natural gas in the Midwest are all but sure to finish the summer far above historical norms, reflecting robust production that offset strong seasonal cooling demand. Storage entered the summer at stout levels after a mild 2023-24 winter kept heating demand in check.
Midwest storage stood at 909 Bcf as of Aug. 23, according to the latest Energy Information Administration (EIA) print. That was 11% above the five-year average.
Cash prices have struggled to find momentum as a result of the regional inventory surfeit. Chicago Citygate prices hovered around $1.500/MMbtu in late August, often a few cents above NGI’s Spot Gas National Avg. but down about 70 cents from a year earlier.
The year/year trajectory of NGI’s Midwest Regional Avg. essentially mirrored the benchmark Chicago hub.
That noted, the Midwest storage surplus is down dramatically from around 40% in March, thanks to a temporary but notable spring pullback in production and above-average heat this summer. What’s more, major natural gas producers, including EQT Corp. and Chesapeake Energy, said that if prices remained low late in the summer, they would curtail volumes in the fall after doing so last spring.
The spring curtailments intersected with maintenance events and brought output from well above 100 Bcf/d to the mid-90s Bcf/d at the low point. The reductions had their intended effect. NGI’s national spot price average gained more than 10% in May, with Midwest prices following suit.
Wood Mackenzie estimates show production hovering back near 102 Bcf/d through most of August. But if producers scale back again in the fall shoulder season, it could help to further narrow storage surfeits and provide price support, said Paragon Global Markets LLC’s Steve Blair, managing director of institutional energy sales.
NGI’s Forward Look projected Friday that Chicago Citygate would climb from a balance of summer price of $1.598 to $3.361 for the coming winter.
“The largest unknown factor that will come into play as we move forward will be the market expectations for the upcoming winter season,” Blair told NGI. A harsh winter could quickly flip the script on supply/demand balances and storage, he said, particularly if it follows a pullback in production.
Such a scenario appears possible in the Midwest, according to an August outlook from the National Oceanic and Atmospheric Administration (NOAA). The agency said it anticipates a La Niña weather pattern for the coming winter, which bodes well for snow and cold in the Midwest.
“Such episodes in the winter months feature a wave-like jet stream flow across the United States and Canada, which causes colder and stormier than average conditions across the North, and warmer and less stormier conditions across the South,” NOAA forecasters said in a report.
Historically for swaths of the Midwest, “fall tends to be warmer and drier than normal while winters tend to be wetter than normal.” Wet winters mean heavy snow that can pile up and trap frozen ground conditions beneath. This makes it difficult for northern markets to break free from winter’s grasp, potentially resulting in long heating seasons, the forecasters explained.
The Farmer's Almanac is predicting an early start to winter conditions in the Midwest and Great Lakes region. Its forecast calls for snow and chilly rains to begin in early November and continue through Thanksgiving. The region could see normal conditions in December, followed by a frigid January.
Ahead of that, however, National Weather Service and AccuWeather forecasts call for above-average temperatures through much of the fall – which could mean a comfortable Midwest season, with highs in the 70s potentially lasting deep into September and October.
“A warm autumn is expected for nearly all of the country this year as the transition from summery to fall-like weather takes place slower and much later than usual,” said AccuWeather meteorologist Brian Lada.
