Natural gas price continued their sharp downward trend during last week. The recent natural gas storage report may bring natural gas prices further down because for the first time in 16 weeks there has been an injection which could mean the unofficial end of the winter season. Since natural gas storage is still very high – over 50% above the levels from the 5 year average, it doesn’t look well for natural gas producers as natural gas prices may continue their sharp fall in the weeks to come.
Here is a summary of the recent U.S natural gas market provided by the EIA regarding the week ending on March 16th:
Natural Gas Storage
The underground natural gas storage (Billion Cubic Feet) changed direction and after it had increased for 16th consecutive weeks, last week the storage levels slightly rose by 0.5% or by 11 Bcf; the natural gas storage settled at 2,380 billion cubic feet for all lower 48 states; the current natural gas storage is 54% above the 5-year average, and is also 47.5% above the storage level during the same week in 2011. As a comparison, during the same week in March 2011 the total natural gas extraction was 6 Bcf. This means at the current stage when the storage levels will start to stock up, the gap between the normal storage levels and the current level will further expand; there is also the possibility of natural gas storage reaching its max capacity – in such a case we may see an even sharp drop in natural gas prices. If not for the high crude oil prices, we may have seen natural gas prices reaching by now well below the $2 mark.
The increase in storage was primarily due to a 55 Bcf injection from the producing region natural gas storage.
In the following chart are the developments in natural gas storage (weekly figures) and Henry Hub natural gas prices between the years 2011 and 2012. During last week the Henry Hub spot price sharply declined by 6.6% to a weekly average price of $2.11/mmbtu. Furthermore, the Henry Hub price was $1.77/mmbtu below its price level the same week in 2011.
Consumption
The average U.S natural gas consumption, on a national level, sharply declined by 9.5% (week over week) during last week. The residential/commercial sectors led the drop with a 25.02% decrease. The total demand for gas was 9.21% below the levels from the previous week and 0.25% below the levels of the same week in 2011.
Production and Imports
Imports of natural gas from Canada declined during last week by 9.65%; the imports were also 6.86% below the levels in 2011.
The gross natural gas production edged up last week by 0.73%, and is 5.83% above the production level in 2011. As a result the total supply of natural gas increased by 0.14% during last week.
According to the report the natural gas rotary rig count decreased by 7; by the end of last week the number of natural gas rigs reached 663.
On a national level, the US temperatures were still 8.9 degrees warmer than 30-year normal, and 6.6 degrees warmer from the same week last year.
Prices for the Week Ending March 16th
The Nymex Henry Hub Future (April delivery) slightly rose during last week by 0.43% and reached on Friday $2.33 /mmbtu; its average daily change was 0.1%, and its weekly average price was 1.25% below the previous week’s average price.
A detailed analysis of natural gas prices for the week of March 16th is herein.
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