NEW YORK U.S. natural gas inventories climbed last week to an all-time high, the fourth straight year a record high has been hit at this point in the season, according to data released Thursday by the Energy Information Administration.
The EIA report showed that total domestic gas inventories climbed last week by 65 billion cubic feet to a record 3.908 trillion cubic feet, eclipsing the previous high of 3.852 tcf hit in November 2011.
(Storage graphic: link.reuters.com/mup44s )
Utilities typically build natural gas inventories from April through October, which are then used to meet about 25-30 percent of winter heating demand.
Based on current weather forecasts, traders expect one or two more weekly inventory builds to drive storage further into record territory before winter withdrawals begin.
Stocks should head into the heating season just shy of 3.95 tcf, still well short of EIA's revised estimate for peak working gas capacity of 4.239 tcf.
A mild winter last year slowed November-through-March gas demand by 600 bcf or more, leaving a huge surplus in inventory at the beginning of the stock building season that helped drive gas prices to decade lows below $2 per million British thermal units back in April.
A spike in demand this year from utilities switching from coal to cheap gas for power generation and strong demand for cooling during a record hot summer helped burn up a lot of excess gas and drive prices up more than 90 percent from spring lows to about the $3.65 area.
But inventories have remained well above average all year.
While a near-normal heating season could eliminate a big chunk of the oversupply that plagued gas prices earlier this year, analysts note that weather is key. If winter fails to show up, prices could get caught in another downward spiral.
"Inventories should come out of a (normal) winter with about 2.1 tcf in the ground. That's not great, it's the second highest ever, but it is more manageable than this year and doesn't point to a $2 price," said Steve Thumb, principal at Energy Ventures Analysis in Virginia.
Some analysts see inventories trimmed even further, to below the 2 tcf level, estimating that a normal winter could add 800 bcf or more to total demand.
Inventories in the producing region climbed to 1.277 tcf last week, topping last November's record of 1.261 tcf but still 11 percent below EIA's peak demonstrated capacity estimate of 1.417 tcf.
Western region storage also notched a new benchmark, climbing to 540 bcf. But western storage remains nearly 11 percent below EIA's peak capacity estimate of 604 bcf.
Total stocks in the East of 2.091 tcf are just 10 bcf short of that regional record of 2.101 tcf set in November 2009.
(Reporting By Joe Silha; editing by Jim Marshall)