Natural gas prices changed direction and after they had declined during most of last week, they have risen during recent days. The total demand rose last week mainly due to the rise in the demand for power sector. The natural gas production and rig count declined again. The EIA report also reviews the recent rise in natural gas production in Pennsylvania. The storage levels continue to rise but by a slower rate than last year. According to my rough guess at the current rate the storage will peak around November at 4,000.
Here is an analysis and short review of the recent developments in U.S natural gas market based on the EIA report for the week ending on September 6th:
Natural Gas Storage
The underground natural gas storage (Billion Cubic Feet) rose for the twenty-sixth consecutive week; last week the storage levels rose by 0.79% or by 27 Bcf – the lowest injection in the past four weeks; the storage reached 3,429 billion cubic feet for all lower 48 states; the current storage is 9% above the 5-year average, and is also 11.1% above the storage during the same week in 2011 – these figures are lower than the figures from last week by nearly two percent points. During the parallel week of September 2011 the NG injection was 87 Bcf and the five year average injection for the first week of September was 76 Bcf. The recent injection was much lower than past years’ injections. According to my (very) crude estimates, if this trend will continue the storage level will peak around the middle of November at nearly 4,000 Bcf, which is higher than the storage level in 2011.
The rise in storage was primarily due to a 38 Bcf injection from the Eastern consumption region storage.
In the following chart are the developments (based on weekly figures) in storage (and Henry Hub spot price between the years 2009 and 2012. The chart shows the recent rally of 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 rose by 3.7% to a weekly average price of $2.82/mmbtu. The Henry Hub price was still $1.14/mmbtu below its price during the same week in 2011.
During last week the average U.S consumption, on a national level, fell by 5.01% (W-over-W). The consumption was 12.3% higher than last year.
The power sector led the fall with a 14.61% drop. On the other hand, other sectors’ demand rose led by the residential/commercial sector’s demand that increased last week by 17.63%. The total demand for gas was down by 4.93% than the previous week levels but was 13.43% above the same week in 2011.
Production and Imports
Imports from Canada fell during last week by 6.4%; they were 7.7% above the levels in 2011.
The gross production rose last week by 3.12% but was 2.2% above the production level in 2011. As a result, the total supply of natural gas rose by 2.27% during last week.
According to the report the natural gas rotary rig count fell by 21; by the end of last week the number of rigs reached 452.
On a national level, the U.S temperatures were 5.1 degrees warmer than the 30-year normal and 4 degrees cooler than last year. The higher than normal weather is among the factors pulling up the demand for natural gas in certain sectors such as residential/commercial.For further reading: