Natural gas prices declined during the first few days of week but they have soon changed direction and hiked today following the release of the recent EI natural gas report. The total NG demand declined during the week mainly due to the sharp drop in the demand in the residential/commercial sector. The natural gas production edged down again; rig count also decreased. The storage levels increased again at a slower rate than last year and the 5-year average. According to my rough guess at the current pace the storage will peak around mid-November at around 4,000.
Here is an analysis and short overview of the recent developments in U.S natural gas market based on the EIA report for the week ending on October 12th:
Natural Gas Storage
The underground natural gas storage (Billion Cubic Feet) increased for the thirty-first consecutive week; last week the storage levels rose by 1.37% or by 51 Bcf; the storage reached 3,776 billion cubic feet for all lower 48 states; the current storage was 7.1% above the 5-year average, and is also 5% above the storage during the same week in 2011 – these figures are lower than the figures from the previous week. During the parallel week of October 2011 the NG injection was 103 Bcf, and the five year average injection for the second week of October was 66 Bcf. Thus, the recent injection was much lower than last year and the past years’ average injections. According to my (very) crude estimates, if this trend will continue the storage level will peak around next month at nearly 4,000 Bcf, which will still be higher than the storage level in 2011.
The rise in storage was primarily due to a 24 Bcf injection from the Eastern consumption region storage.
In the following chart are the changes (based on weekly figures) in storage (and Henry Hub spot price between the years 2011 and 2012. As seen, natural gas prices have had an upward trend in recent weeks. All awhile the storage levels continue to stock up at a slower pace than in recent years.
During last week the Henry Hub spot price rose again by 1.2% to a weekly average price of $3.26/mmbtu. The Henry Hub price remained $0.22/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 3.96% (W-over-W). The consumption was still 8.62% higher than last year.
The residential/commercial sector led the fall with a 9.5% drop; the power sector’s consumption also decreased last week by 2.7%. On the other hand, Industrial sector’s demand edged up last week by 0.23%. The total demand for gas was down by 3.94% than the previous week levels but was 9.67% above the same week in 2011.
Production and Imports
Imports from Canada fell during last week by 5.16%; they were 8.84% above the levels in 2011.
The gross production edged down last week by 0.25% but was 0.6% above the production level in 2011. As a result, the total supply of natural gas edged up by 0.05% during last week.
According to the report the natural gas rotary rig count declined by 15; by the end of last week the number of rigs reached 422.
On a national level, the U.S temperatures were 4.6 degrees cooler than the 30-year normal and were also 7.4 degrees cooler than last year. The drop in the temperatures may have contributed to the fall in the demand for natural gas.
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