Natural gas market keeps on leveling out | EIA review, Mar 18

The natural gas market starts to level out with fewer price drops. The turmoil in the Middle East doesn’t seem to affect this energy market even though the turmoil has an affect on other energy markets mainly crude oil. The recent tsunami attack on Japan and its energy shortage might have an affect on natural gas prices as suggested in an earlier post.

Let’s examine in detail the recent EIA weekly report regarding natural gas market in the U.S. for the week ending on March 11th:

Natural gas Storage

Natural gas storage continue to decline, however at a more moderate rate: last week (of March 11th) the underground natural gas storage (Billion Cubic Feet) fell for the seventeenth straight week, by 3.3%, or 56 billion cubic feet; this draw, was smaller than last week’s draw (71 billion cubic feet) and nearly equal to the 5-year average draw of 58 BcF.

The natural gas storage reached a total of 1,618 billion cubic feet for all lower 48 states, which is higher by 1 billion cubic feet for the same week in 2010; this is the lowest level since April 2010. Furthermore, the natural gas storage was higher than 5-year average by 23 BcF.

The graph below shows both the natural gas storage (weekly figures) and Henry Hub spot price changes during 2011; it shows a rise in natural gas spot price during the first month of the year followed by a decline at the end of February and stabilization during March; natural gas storage fell sharply during January- February, indicating a rise in consumption; in the last month there is still a drop in storage, however at a much lower rate, seeing that the curvature of the storage graph is less steep. This might explain why natural gas prices leveled during March, as the pressure from demand for natural gas had fallen.

 

Natural gas spot price (Henry Hub Natural Gas storage March 17

Consumption

Natural gas consumption fell in the U.S. during the week ending on March 11th: the average daily consumption in the US decreased by 3.6% compares to the previous week to an average of 69.4 Bcf per day; the main cause for this decline is the warmer weather as reflected in a drop of 7.3% compare to the previous week in residential and commercial sectors’ consumption.

Production and Imports

According to BENTEK, domestic production of natural gas in the US reached 63 Bcf per day, which is higher by 5.2% than last year’s time.

There was a significant decline in imports of natural gas to the US compare to last years’ time; according to BENTEK, imports from Canada lower by 6%  than last year same time(5.8 Bcf per day), and 1 Bcf per day below the average the week earlier.

The weather in the US was warmer than the season normal for the week ending on March 10th, as the U.S. temperatures were on a weekly average of 43.0 degrees. The decrease in the natural gas prices premiums in the Northeast over the Gulf of Mexico natural gas prices declined during that week as the temperatures rose and the demand pressure for natural gas had declined.

Prices for the week ending March 11th

Natural gas spot price (Henry Hub) showed last week moderate inclinations as it rose from beginning to end of the week by 1.61% and reached 3.79$/mmbtu at the end of the week. On average, it increased by 0.5% on a daily basis, but the average weekly price was 0.5% below the average weekly price in the previous week.

The Nymex Henry Hub Future Price (April delivery) on the other hand declined last week by 0.94% from beginning to end of the week; however, its average price was 0.7% higher than last week’s average price.

A detailed analysis on natural gas spot price for the week of March 11th is in the herein.

In total, natural gas imports, consumption and storage fell during that week, while natural gas spot price and production rose.

 

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