Natural gas prices changed direction and bounced back in recent days despite the increase in injections in natural gas storage. The total demand tumbled last week mainly due to the plunge in the demand for power sector. The natural gas production edged up while and rig count declined. The storage levels continue to rise but at a slower rate than in past years. I revised my guess so that at the current rate the storage will peak around mid-November at 4,000.
Here is an analysis and short recap of the latest developments in U.S natural gas market based on the EIA report for the week ending on August 17th:
Natural Gas Storage
The underground natural gas storage (Billion Cubic Feet) increased for the twentieth consecutive week; last week the storage levels rose by 1.44% or by 47 Bcf; the storage reached to 3,308 billion cubic feet for all lower 48 states; the current storage is 12.1% above the 5-year average, and is also 14.7% above the storage during the same week in 2011 – this is a modest decline in the storage levels that were nearly the 12%- 15% range a week earlier. During the parallel week of August 2011 the NG injection was 73 Bcf and the five year average injection for the third week of August was 56 Bcf. Further, this is the seventeenth 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 mid November at 4,000 Bcf, which lower than the storage level in 2011.
The rise in storage was primarily because of a 48 Bcf injection from the Eastern consumption region storage (there was a drop in storage in other sectors)
In the following chart are the weekly changes in storage (and Henry Hub spot price between the years 2011 and 2012. The chart shows the recent fall in natural gas prices. All awhile the storage levels are stocking up at a slower pace than in recent years.
During last week the Henry Hub spot price tumbled down by 5.1% to a weekly average price of $2.77/mmbtu. The Henry Hub price was still $1.24/mmbtu below its price during the same week in 2011.
During last week the average U.S consumption, on a national level, tumbled by 5.14% (W-over-W). The consumption was 4.19% higher than last year.
The power sector led the drop with a 11.05% decline. On the other hand, many other sectors rose on a weekly scale mainly the residential/commercial sector that increased by 4.46%. The total demand for gas was down by 5.15% than the previous week levels but was 5.06% above the same week in 2011.
Production and Imports
Imports from Canada declined during last week by 5.84%; they were 0.5% above the levels in 2011.
The gross production edged up last week by 0.79% and was 3.35% above the production level in 2011. As a result, the total supply of natural gas edged up by 0.24% during last week.
According to the report the natural gas rotary rig count declined by 11; by the end of last week the number of rigs reached 484.
On a national level, the U.S temperatures were 0.7 degrees warmer than the 30-year normal and 0.9 degrees warmer than last year. The slightly higher than normal weather is among the factors keeping the demand for natural gas higher than last year. On the other hand, the temperatures have declined in recent weeks as the heat has subsided enough to pull the consumption down.
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