Natural gas prices continued their downward trend during recent days despite the low growth in natural gas storage and the continuous hotter than normal weather. The total demand declined last week mainly due to the drop in the power sector. The natural gas production and rig count also dwindled. The storage levels continue to increase but at a slower rate than in recent years. I still guess at the current rate the storage will peak around October at 3,600.
Here is an analysis and short update of the latest developments in U.S natural gas market based on the EIA report for the week ending on August 10th:
Natural Gas Storage
The underground natural gas storage (Billion Cubic Feet) increased for the nineteenth consecutive week; last week the storage levels rose by 0.62% or by 20 Bcf; the storage reached to 3,261 billion cubic feet for all lower 48 states; the current storage is 12.5% above the 5-year average, and is also 15.7% above the storage during the same week in 2011 – this is a decline in the storage levels that were nearly the 13%- 16% range a week earlier. During the parallel week of August 2011 the NG injection was 50 Bcf and the five year average injection for the second week of August was 40 Bcf. Further, this is the sixteenth consecutive week in which the injections were lower than the injection during the same week in 2011. According to my (very) crude estimates, if this trend will continue the storage level will peak around late October at 3,600 Bcf, which lower than the storage level in 2011.
The rise in storage was primarily because of a 29 Bcf injection from the Eastern consumption region storage (there was a drop in storage in other sectors)
In the following chart are the weekly developments in storage (and Henry Hub spot price between the years 2011 and 2012. The chart presents the recent decline in natural gas prices. All awhile the storage levels are stocking up at a much slower rate than in recent years.
During last week the Henry Hub spot price tumbled down by 6.4% to a weekly average price of $2.92/mmbtu. The Henry Hub price was still $1.09/mmbtu below its price during the same week in 2011.
Consumption
During last week the average U.S consumption, on a national level, fell by 2.74% (W-over-W). The consumption was 11.12% higher than last year.
The power sector led the drop with a 6.79% decline. On the other hand, many other sectors rose on a weekly scale mainly the residential/commercial sector that increased by 6.2%. The total demand for gas was down by 2.43% than the previous week levels and was 4.23% above the same week in 2011.
Production and Imports
Imports from Canada declined during last week by 4.43%; they were 5.58% above the levels in 2011.
The gross production edged up last week by 0.12% and was 2.42% above the production level in 2011. As a result, the total supply of natural gas declined by 0.4% during last week.
According to the report the natural gas rotary rig count declined by 3; by the end of last week the number of rigs reached 495.
On a national level, the U.S temperatures were 3.1 degrees warmer than the 30-year normal and 0.4 degrees warmer than last year. The higher than normal weather is among the factors keeping the demand for natural gas higher than in recent years.
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