US natural gas storage 'a trainwreck'

27/08/2009

Weak demand for natural gas throughout the US is causing a storage backlog that could create unprecedented challenges for the industry, it has been reported.

According to the Financial Times, energy companies have been pumping spare natural gas into underground reservoirs, aquifiers and abandoned oil wells at "bewildering rates" as the demand for the fuel has plummeted since the onset of the economic crisis.

Now, with such storage facilities, there is a danger that natural gas could move back up into the pipeline network.

"The outlook for US natural gas storage in the next few months is quickly approaching a trainwreck," said James Crandell, of Barclays Capital in New York.

With a lack of available storage space and anaemic demand for the fuel, natural gas prices could plummet in the weeks to come, analysts have warned.

Meanwhile, data from the Energy Information Administration released yesterday (August 26th) showed that demand for heating oil also slumped last week, with inventories rising by 800,000 barrels, despite widespread optimism that demand would pick up.