Natural gas price sharply declined during last week. The pace natural gas is extracted from storage is similar to the level extracted during the same week last year despite the slightly higher than normal weather. But the storage levels are still very high in historic perspective which means natural gas prices are likely to continue their descent 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 2nd:
Natural Gas Storage
The underground natural gas storage (Billion Cubic Feet) decreased for the 15th consecutive week; last week by 3.18% or by 80 Bcf; the natural gas storage reached 2,433 billion cubic feet for all lower 48 states; the current natural gas storage is 48.3% above the 5-year average, and is also 43.6% above the storage level during the same week in 2011. As a comparison, during the same week of March in 2011 the total natural gas extraction was 71 Bcf – a similar level of extraction to this week’s extraction. This means at the current extraction pace the storage levels will continue to be much higher than last year’s levels.
The decline in storage was primarily due to a 60 Bcf extraction from the Eastern region natural gas storage.
In the following chart are the shifts 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 fell by 6.8% to a weekly average price of $2.45/mmbtu. Furthermore, the Henry Hub price was $1.37/mmbtu below its price level the same week in 2011.
The average U.S natural gas consumption, on a national level, declined by 3.22% (week over week) during last week. The residential/commercial sectors led the fall with a 5.37% decrease. The current demand for gas is 3.4% above the levels during the same week in 2011.
Production and Imports
Imports of natural gas from Canada rose during last week by 1.93%; the imports were also 8.19% above the levels in 2011.
The gross natural gas production slightly declined last week by 0.63%, but is 6.7% above the production level in 2011. As a result the total supply of natural gas edged down by 0.80% during last week.
According to the report the natural gas rig count decreased by 19; by the end of last week the number of natural gas rigs reached 691.
On a national level, the US temperatures were still 2.7 degrees warmer than 30-year normal, and 3.0 degrees warmer than last year.
Prices for the Week Ending March 2nd
The Henry Hub Future (short term delivery) sharply fell during last week by 2.75% and reached on Friday $2.48 /mmbtu; its average daily change was -0.5%, and its weekly average price was 3.5% below the previous week’s average price.
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