Storage Economics: Why the April–January Gas Spread Is Flashing Bullish
- Timothy Beggans
- 1 day ago
- 2 min read
The natural gas April–January spread has widened to roughly $1.80 — and that move is speaking loudly.
At current levels, the spread is brushing up against — and in some cases exceeding — implied underground storage costs along the U.S. Gulf Coast. Base rates have climbed into the $0.25–$0.35 per Dth per month range, with many contracts now clearing in the low $0.30s. Rising labor and material costs, combined with limited new build capacity, are structurally lifting the cost floor of storage.
This widening spread is a classic market incentive: inject early, inject aggressively.
U.S. end-of-season (EOS) projections are sitting between 1.67–1.75 TCF — historically tight given demand growth. Meanwhile, Europe’s EOS estimate has fallen to 650–800 BCF out of 4 TCF capacity. That deficit will require a strong LNG pull throughout the entire injection season (April–October). Europe continues to source 45–60% of its LNG needs from the United States, anchoring global arbitrage flows.
The result? A structural bid under summer gas.
Domestically, demand growth adds another layer. Gas-fired generation must meet rising power loads, particularly from AI and data center expansion. That incremental baseload demand directly competes with LNG exports for physical molecules.
Overlay this with limited storage expansion. Salt dome development along the Gulf Coast faces geographic constraints, while inland capacity relies on depleted reservoirs and aquifers. With little incremental storage growth in recent years, volatility increases as system flexibility tightens.
The April–January spread isn’t just a trade — it’s a signal. The market is pricing urgency: refill now, because global and domestic demand will compete hard for every incremental molecule.
If the spread remains near or above carry costs, injections should accelerate. If not, volatility may intensify into winter.
The storage cycle has begun.
Sources:
EIA Natural Gas Storage Data: https://www.eia.gov/naturalgas/storage/
AGSI+ Europe Gas Storage: https://agsi.gie.eu/
U.S. LNG Export Data: https://www.eia.gov/naturalgas/
Comments