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Platts 2015 Storage Conference ends with success
Written by Dr. Parsons   
Monday 09 February 2015

The Platts 13th annual Gas Storage Outlook conference in January was full of great information. WTM both led a panel discussion on the effects of the 2014 polar vortex and presented what optimal storage trading looks like.

The polar vortex panel discussants made such observations such as coal usage will continue to decrease due to lower natural gas prices, even if regulatory restrictions on coal relax; aquifer storage uses too much pad gas to be terribly useful, even in polar vortex times; fast-cycle storage was really useful during the vortex while reservoir storage was not.

The WTM discussion on what optimal storage trading looked like used a previous historical year, 2005/2006, for illustration. Cash trading is what optimizes storage value, not baseloading, and optimal cash trading back then showed that such trading deviates greatly from the usual trader practice of baseloading, even for slow-cycle storage. Optimal hedging never required hedging 100% of capacity then, either.

WTM also gave a simple example of how baseloading destroys value relative to cash trading: Twice the profit could be had in this example by cash trading over baseloading. By merely recognizing expected trends in cash prices through a month and injecting/withdrawing accordingly, such profit could be had. In other words, cash trading can collect much more intrinsic value than baseloading, apart from any volatility, and volatility only adds to that value.

Last Updated ( Monday 09 February 2015 )

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