Natural gas prices hiked during recent days up until yesterday. Today, the price of natural gas resumed its rally. The total NG demand slipped during the week mainly due to the decline in the demand in the residential/commercial sector. The natural gas production slightly rose while the rig count decreased. The storage levels rose again at a slightly slower rate than last year and the 5-year average. According to my rough guess at the current pace 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 October 4th:
Natural Gas Storage
The underground natural gas storage (Billion Cubic Feet) rose for the twenty-ninth consecutive week; last week the storage levels increased by 2.15% or by 77 Bcf – the second highest injection in 2012; the storage reached 3,653 billion cubic feet for all lower 48 states; the current storage was 8.3% above the 5-year average, and is also 8% above the storage during the same week in 2011 – these figures are slightly lower than the figure from last week. During the parallel week of September 2011 the NG injection was 97 Bcf, and the five year average injection for the last week of September was 79 Bcf. Thus, the recent injection was slightly 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 the mid-November at nearly 4,000 Bcf, which is higher than the storage level in 2011.
The rise in storage was primarily due to a 42 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. The chart shows the recent rally of natural gas prices. 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 hiked by 6.2% to a weekly average price of $2.93/mmbtu. The Henry Hub price remained $0.88/mmbtu below its price during the same week in 2011.
During last week the average U.S consumption, on a national level, fell by 0.29% (W-over-W). The consumption was still 6.52% higher than last year.
The residential/commercial sector led the fall with a 4.39% drop. Indusial sector’s demand also rose last week by 1.43%. On the other hand, the power sector’s demand also decreased last week by 1.29% while the demand for NG in the power sector increased. The total demand for gas was down by 0.27% than the previous week levels but was 6.86% above the same week in 2011.
Production and Imports
Imports from Canada rose during last week by 0.95%; they were 0.05% above the levels in 2011.
The gross production edged up last week by 0.23% and was 1.47% above the production level in 2011. As a result, the total supply of natural gas increased by 0.27% during last week.
According to the report the natural gas rotary rig count declined by 19; by the end of last week the number of rigs reached 435.
On a national level, the U.S temperatures were 0.4 degrees cooler than the 30-year normal and were 3.4 degrees cooler than last year. The drop in the temperatures may have curbed the growth in the demand for natural gas.
For further reading: