- Operators rely heavily on storage withdrawals to manage customer requirements as they vary due to temperature. Storage gas is readily available near major markets, while incremental supplies from other sources (e.g., production, imports, LPG injection) are subject to operational lags in responding to demand shifts.
- The relation between storage withdrawals and price is not as defined as that with heating degree days because of the reverse causality between withdrawals and price. Price can motivate storage activity, but storage activity also influences price. For example, storage withdrawals can be increased as incremental supplies are introduced into the market in reaction to relatively high prices. Conversely, storage activity can determine price, such as when high prices occur early in the heating season and operators utilize stocks cautiously to maintain levels throughout the heating season (e.g., Nov/Dec 1996). In both cases, prices are relatively high, but the volumes of storage gas withdrawn for the market differ.
- The absence of a strong relation between storage utilization and wellhead prices indicates that volatility is unlikely to be managed effectively by gas from storage.
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