Natural Gas Market Heats Up as Storage Depletion Season Commenced

Natural gas is heating up again as its price rallied last week. Based on the recent EIA update, part of the rise could be attributed to the first extraction from storage for this season buildup: the storage extraction was 45Bcf. This week’s extraction was higher than last year’s pace. The recent market reaction is likely to progress on account of expected lower than normal temperatures mainly in the East Coast in the coming weeks.

The Nymex Henry Hub Future (short term delivery) increased again by 2.95% and reached by Friday $3.77/mmbtu – its highest level this month; its average daily change was 0.59%; its weekly average rate was 1.91% above last week’s average rate.

The difference between the NG future and spot prices – future minus spot – was mostly in Backwardation during last week.

Natural Gas Charts

The following charts present the changes in Nat-gas future (Nymex Henry Hub) in $/mmbtu during November 18-22.

Natural Gas price  chart - November 18-22  2013As you can see in the chart above, the natural gas price (Henry Hub future rate) has risen during most of the week.


In the second chart are the daily percent changes of the Nymex Henry Hub future (short term delivery).

Natural Gas chart - percent change November 18-22  2013The underground natural gas storage (Billion Cubic Feet) declined for the first time this season during last week by 1.17% or by 45 Bcf; the storage reached 3,789 billion cubic feet for all lower 48 states; the current storage is 0.4% above the 5-year average but is 2.3% below the storage during the same week in 2012. The latest extraction was lower than the five year average and last year’s: During the same week in November 2012 the natural gas extraction was 38 Bcf, and the five year average change in storage for the same week of November was zero. This week’s extraction was mostly due to the eastern consuming region, in which the extraction was 31 Bcf.

Weather and natural gas

The current projections are that the temperatures will remain lower than normal levels throughout the East coast. Considering the expected low temperatures for the season, the demand for natural gas in the residential/commercial sector is likely to further increase in the near future. Nonetheless, the heating degrees days are estimated to be lower than normal and close to last year’s. These factors could also affect the direction of natural gas.

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