Natural gas prices have fallen in recent weeks as mild temperatures weakened demand and allowed a rise in stockpiles.
Despite growing supplies, energy analysts remain concerned that the nation's stores won't be replenished enough during the summer, potentially leading to higher prices in the winter.
"In the short term, the market is feeling good that we can get storage back up," said Phil Flynn, an energy analyst with Price Futures Group in Chicago.
But, he said, it will take time to have a sufficient natural gas supply.
"Supplies are still 40 percent below where they need to be," Flynn said. "Because of that, we still have a long way to go."
The nation saw higher than normal withdrawals of natural gas during the harsh winter.
Natural gas prices fell 9 cents to $4.45 per million British thermal units on the New York Mercantile Exchange on Monday. The recent softening of natural gas prices has been attributed to an increase in stockpiles.
Prices for natural gas are roughly $1 higher than they were a year ago because of the lower than normal inventory levels, said Jack Weixel, director of energy analysis for Bentek Energy, a unit of energy industry publication Platts.
Cooler temperatures and an increase in natural gas production -- up more than 5 percent from last year -- have helped refill depleted stores, said James Williams, an energy analyst and owner of WTRG Economics near Russellville.
"Because of that, we have been able to put gas in storage at a much faster rate than normal," he said. "We will still be below the amount that we have had in the last five years, but we should have sufficient gas to get through the winter unless we have a repeat of this brutal winter."
Drilling for natural gas has grown in shale formations such as the Eagle Ford in Texas and the Marcellus in the Northeast. Drilling has slowed in Arkansas in recent years as producers have focused on shales that produce natural gas liquids and oil.
Total natural gas consumption in the U.S. has declined despite the seasonal increase in power generation by electric utilities because of warmer temperatures, the U.S Energy Information Administration said in a report last week.
The five-year average for natural gas in storage is about 3.8 trillion cubic feet, Williams said.
Current storage levels are 29.1 percent below levels a year ago and 33.1 percent below the five-year average, the Energy Information Administration report said.
Weixel expects natural gas supplies to reach about 3.3 trillion cubic feet by November 1.
Last winter, which was the fourth-coldest on record, the United States withdrew about 3 trillion cubic feet from storage between November 1 and March 31, he said.
"What that says to me is that another cold winter like last year definitely would put the market on edge," Weixel said, adding that it would result in a "severe swing in prices."
"That's kind of a doomsday scenario," he said. "You're definitely more susceptible to price increases with less in the ground to move."
Business on 06/24/2014