Natural gas prices continue their freefall and there is little evidence that this sharp decline will end in the near future. The storage levels are still very high for the season and the extraction of natural gas from storage is much smaller than last year. This is partly due to the late arrival of winter and the high production levels. These facts may be among the key factors in dragging natural gas prices down.
Here is a summary of the recent U.S natural gas market info collected by the EIA for the week ending on January 6th:
Natural Gas Storage
The underground natural gas storage (Billion Cubic Feet) declined for the seventh consecutive week; last week by 2.74% or by 95 Bcf; the natural gas storage reached 3,377 billion cubic feet for all lower 48 states; the current natural gas storage is 17% above the 5-year average, and is 13.4% above the storage level during the same week in 2011. As a comparison, during the first week of January the total extraction of was 138 Bcf.
The sharp decline in storage was primarily due to a 76 Bcf extraction from the Eastern region natural gas storage.
In the following chart are the developments of natural gas storage (weekly figures) and Henry Hub natural gas prices during 2009-2012. During last week the Henry Hub spot price sharply fell to a weekly average price of $2.92/mmbtu. The Henry Hub price was $1.60/mmbtu below its price level the same week in 2011. The chart also shows that natural gas prices tend to peak at during January and June; this scenario, however doesn’t seem to be the case this year as natural gas price has a downward trend in the past several months.
Consumption
The average U.S natural gas consumption, on a national level, decreased by 7.12% (week over week) during last week. The residential/commercial sectors led the fall with a 11.27% decrease. The 2012 consumption in the residential/commercial sector is 34.34% below the levels in during the first week of 2011.
Production and Imports
Imports of natural gas from Canada declined during last week by 8.28%; the imports were 31.34% below the levels in 2011.
The gross natural gas production on the other hand slightly rose during last week by 0.12%, and is 10.28% above the production level in 2011. As a result the total supply of natural gas rose by 0.24%, during last week.
According to the report the natural gas rig count slightly declined by 2 by the end of last week to reach 811.
On a national level, the US temperatures were 6.4 degrees warmer than 30-year normal, and 4.6 degrees warmer than last year. The warm season is probably among the factors keeping natural gas prices low for the season.
Prices for the Week Ending January 6th
Natural gas price, the Nymex Henry Hub Future Price (short term delivery) rose during last week by 2.34% and reached on Friday $3.06 /mmbtu; its average daily change was 0.63%, but its weekly average price was 1.43% below the previous week’s average price.
A detailed analysis of natural gas prices for the week of January 6th is herein.
To sum up, natural gas consumption, imports, prices and storage declined, while natural production rose during the week of January 6th.
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