Brazil (the Movie) and the Natural Gas Market

brazil22 With natural gas storage in the U.S. having just surpassed the record levels of 2007, and with every available pipeline, tank, crevice and rock now being forced to hold the stuff, I have visions of that scene in the movie Brazil when Jonathan Pryce turns the mail tube around and sends mail back into the system. That didn’t turn out well, did it.

Here is Bloomberg:

The steepest rally in natural gas prices since 2006 is coming to an end as the 400 salt caverns, depleted oil fields and aquifers used to store the fuel in the U.S. reach capacity for the first time.

Stockpiles may surpass the record of 3.545 trillion cubic feet by as much as 350 billion cubic feet this fall, Energy Department estimates show. Gulf South Pipeline Co. says its fields in Louisiana and Mississippi are so full that customers will have to pay penalties for exceeding their limits. With no place to go, producers will be forced to dump excess fuel on the market.

…“I don’t know where all of this gas is going to go,” said Schork, a former natural gas trader on the New York Mercantile Exchange, who in June forecast inventories would reach near 3.8 trillion cubic feet. “We’re a month away from significant heating demand. Something’s got to give.”

Check natural gas price (as proxied by UNG) and supply over the last couple of years in the following chart:

brazil-ng

More here.

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