The EIA issued its weekly report regarding the natural gas market in the U.S. for the week ending on January 21st:
Natural gas spot price increased during that week; consumption also rose but natural gas storage declined; yet temperatures were slightly warmer than normal. Here are the highlights of the recent EIA report along with my insight:
Natural gas spot price (Henry Hub): it increased during the week ending on January 21st and reached over 4.73$/mmbtu – a 4.65% rise from beginning to end of the week.
On average, the natural gas spot price rose by 1.96% on a daily basis, and the average weekly price is 2.5% higher than the average weekly price in the previous week.
This incline in price is mostly related to the rise in consumption as will be presented herein.
Consider the latest news on Bloomberg that the returns for buying natural gas this spring for the purpose of storing and selling it next winter has dropped – the premium is at an over 5 year low, with nearly half the spread compare to last year. This could mean fewer speculators betting on natural gas prices to rise.
Natural gas Storage
In my last review on U.S. natural gas storage, there was a drop of 8.2%, in underground natural gas storage (Billion Cubic Feet); according to the recent report for the week of 21st of January, the natural gas storage continued to decline, this time by 6.4%, a fall of over 174 billion cubic feet. This withdrawal of natural gas is larger than last years’, which brings the levels of natural gas very close to the levels last year; and finally the, the natural gas storage is higher than the five year average of 152 BcF.
The natural gas storage reached a total of 2,542 billion cubic feet for all lower 48 states, which is higher by 21 billion cubic feet for a similar time in 2010.
Due to the cold weather (see below) there was an incline in natural gas consumption of 3.4% during the week of January 21st compare to the previous week. The prime contributors were due to the power and industrial sectors with 1.4% and 4.6% rise, respectively.
The weather in the US was colder than the season normal weather for the week ending on January 21st, however still much colder than last year: the average U.S. temperatures were slightly colder than normal with a weekly average of 33.7 degrees – 0.7 degrees above normal, and 5.4 degrees below the same week last year.
Production and Imports
Domestic production increased in the passing week by 1.3% compare to the previous week.
The import of Canadian gas also inclined by 4.5% compare to previous week.
In total, consumption, prices, production and imports inclined while natural gas storage declined.
A suggested reason for the rapid increase in natural gas spot price could be because:
On the demand side: the rise in consumption, which was higher (quantity wise) than the rise in production or imports; furthermore, the demand rose mainly in sectors (e.g. industry) that are willing to pay a high pricing than the domestic sector.
On the supply side, there was a higher rise (percent wise) in imports (4.5%) than in production (1.3%); this could suggest that Americans paid more for imported natural gas than domestic gas, in which the price of the former is probably more expensive than the price of the latter.
These two sides could offer a suggestion for the rise in natural gas spot price during last week.
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