The EIA issued its weekly report regarding the natural gas market in the U.S. for the week ending on January 28th:
Natural gas spot price declined during that week; consumption, however rose while the production declined due to the extreme cold weather throughout in the US. Thus there was a sharp draw from the natural gas storage; this is probably why we saw this week a steep rise in natural gas prices. Here are the highlights of the recent EIA report along with my insight:
Prices
Natural gas spot price (Henry Hub) declined during the week ending on January 28th as it descended to 4.29$/mmbtu – a 9.1% fall from beginning to end of the week.
On average, the natural gas spot price declined by 1.87% on a daily basis, and the average weekly price is 2.6% below than the average weekly price in the previous week.
A detailed analysis on natural gas spot price for the week of January 28th is in the herein.
Natural gas Storage
In my last review on U.S. natural gas storage, there was a drop of in underground natural gas storage (Billion Cubic Feet); according to the recent report for the week of 28th of January, the natural gas storage continued to decline, this time by 7.4%, a fall of over 189 billion cubic feet; this draw is much higher than the 5-year average draw of 165 BcF; that being said, the natural gas storage is higher than the five year average, but only by 0.2%.
The natural gas storage reached a total of 2,353 billion cubic feet for all lower 48 states, which is lower by 53 billion cubic feet for the same week in 2010.
Consumption
Due to the extreme cold weather (see below) there was a sharp incline in natural gas consumption of 10.7% during the week of January 28th compare to the previous week, and 1 percent higher than the same time last week. The prime contributor was the electric power system in the Southwest.
The weather in the US was colder than the season normal for the week ending on January 28th, and much colder than last year: the average U.S. temperatures were slightly colder than normal with a weekly average of 30.1 degrees – 3.6 degrees below last week’s temperatures.
Production and Imports
Domestic production decreased in the passing week to an average 62 Bcf/day, probably due to the freeze-off in the Southwest. Nonetheless, the production is still higher than last year’s production during the same time.
The import of Canadian gas also declined by 3% compare to previous week to reach merely 8 Bcf per day.
In total, natural gas consumption inclined, while natural gas storage, prices, production and imports declined.
A suggested reason for the decrease in natural gas spot price during that week could be because there was perhaps a lag in the pressure by the demand to drive prices up (effect of the sharp increase in consumption).
There is also an expected downward trend in natural gas prices during February, as I have suggested before.
And finally, from the supply side, there was a decline in imports and production, and thus most of the natural gas usage was taken from storage. This might suggest that Americans paid more for domestic gas than imported natural gas, in which the price of the former is probably lower than the price of the latter.
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