Natural gas prices resumed their sharp downward trend after they had inclined in recent weeks. On the other hand natural gas storage level continues to decrease, but is still well above the levels recorded in recent years. Along with the late arrival of winter in the U.S., no wonder natural gas prices are still very low compared to their rate a year earlier.
Here is a summary of the recent U.S natural gas market EIA report regarding the week ending on December 16th:
Natural Gas Storage
The underground natural gas storage (Billion Cubic Feet) sharply fell for the fourth consecutive week; last week by 2.68% or by 100 Bcf; the natural gas storage reached 3,629 billion cubic feet for all lower 48 states; the current natural gas storage is 11.9% above the 5-year average, and is 6.9% above the storage level during the same week in 2010. The higher than normal levels of natural gas storage might explain the ongoing decline in natural gas prices despite the drop in storage. Furthermore, the late arrival of winter to the East Coast might also be among the factors to the weakness of the natural gas prices this season so far.
The sharp decline in storage was primarily due to a 63 Bcf extraction from the Eastern region natural gas storage.
In the following chart are the development of natural gas storage (weekly figures) and Henry Hub natural gas prices during 2011; the Henry Hub spot price continues its general downward trend despite a short rally in previous weeks. During last week the Henry Hub spot price sharply declined by 9.1% to a weekly average price of $3.08/mmbtu. The Henry Hub price was $1.18/mmbtu below its price level the same week in 2010.
The US natural gas consumption sharply fell last week: the average US natural gas consumption decreased by 7.09% (week over week) during last week on a national level. The residential/commercial sectors led the falls with a 10.98% decrease, followed by the power sector. Therefore, last week’s natural gas consumption was also 14.47% below the levels recorded the same week in 2010.
Production and Imports
Imports of natural gas from Canada changed direction and declined during last week by 3.23% to match the decrease in demand for natural gas for heating purposes; the imports were also 20% below the levels in 2010.
Dry natural gas production on the other hand slightly rose during last week by 0.23%. As a result the total supply of natural gas rose by 0.20% during last week.
According to the report the natural gas rig count slightly declined by 2 by the end of last week to reach 818.
On a national level, the US temperatures were 1.9 degrees warmer than 30-year normal, and 5.7 degrees warmer than last year. Despite the warmer weather, there were regional differences with the Mountain and Pacific regions reaching colder than normal temperatures.
Prices for the Week Ending December 16th
Nymex Henry Hub Future Price (short term delivery) sharply dropped during last week by 3.81% and reached on Friday $3.13/mmbtu; its average daily change was -1.13%, and its weekly average price was 7.11% below the previous week’s average price.
To sum up, natural gas consumption, imports storage, prices and production declined during the week of December 16th.
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