Fitch cites high level of natural gas storage

Natural gas storage levels remain elevated and are not expected to help natural gas prices or US natural gas midstream projects in the near term, according to Fitch Ratings.

Some midstream projects could be at risk if pricing does not improve as producers remain under financial pressure and are hesitant to commit to projects while end-users remain able to secure supply and pipeline capacity at reasonable prices, Fitch said April 22.

Ongoing pressure on gas prices could lead to reduced production volumes, particularly in less economic regions. Lower production volumes and continued weakness in prices could result in natural gas projects becoming delayed or outright canceled. For example, Kinder Morgan Inc. has announced the suspension of its multibillion Northeast Energy Direct project due to economic reasons, driven largely by an inability to contract enough capacity on the proposed pipeline.

However, Fitch believes natural gas storage operators should benefit from increased storage demand.

The April 21 natural gas storage report from the US Energy Information Administration (EIA) continues to show high storage levels. Storage levels were 2,484 bcf, 811 bcf above the five-year average. While storage remains elevated, this week’s data reflect a slight improvement from levels seen in recent weeks.