The natural gas market continues to seem to slow down and yet the natural gas prices (Henry Hub) are still high and rose last week.
Here’s a summary of the recent EIA report on U.S natural gas market for the week ending on May 6th:
Natural gas Storage
The underground natural gas storage (Billion Cubic Feet) increased for the fifth straight week, last week by 4.0%; this was a 70 Bcf injection, as the total storage rose to 1,827 billion cubic feet for all lower 48 states; the natural gas storage was 2% below the 5-year average, and 12% below the storage level during the same week in 2010.
This storage increase was mainly because of the injection of 40 Bcf from the Eastern Consuming Region natural gas storage.
The chart below shows the total natural gas storage (weekly figures) and Henry Hub natural gas prices 2011; notice that natural gas prices continue to rise even though the natural gas storage is rising, which is an indication that the natural gas market is slowing down.
During 2011 (up to date), the weekly percent changes of these two data series have a 0.37 correlation, i.e. at 37% of the time as the storage levels dropped in a certain week, the price also declined. During the same time last year, the correlation was -0.07.
U.S. natural gas consumption fell by 7% during the week, which is mainly attributed to drop in consumption in the residential and commercial sectors; this is probably due to the rise in temperatures.
Production and Imports
The U.S. natural gas production slightly inclined compared to last week, and was 7% higher than the same week last year.
The imports of natural gas from Canada on the other hand continued to tumble by 20% compared to last week and by 40% compared to the same week last year.
The US temperatures reached a weekly average of 56.6 degrees, which was cooler than last year by 5.7 degrees, and 1.7 degrees lower than normal for the week ending on May 5th. Nonetheless, there were regional differences and in the regions where the weather was colder than normal, the demand for natural gas was higher; in the Northeast (one of the prime regions that consume natural gas) the temperatures were warmer than normal.
On of the reasons for high natural gas prices during this season, might have to do with the currently high crude oil prices; natural gas might serve as substitute for heating oil such as propane, for heating purposes in the industrial and residential sectors. Therefore, its purposes as a cheap substitute for crude oil might have inclined natural gas prices in 2011.
Prices for the week ending May 6th
Natural gas spot price (Henry Hub) fell from beginning to end of the week by 7.83% and reached 4.24$/mmbtu on Friday; Its average daily change was -1.19%, but its weekly average was 2.78% above the previous week’s average price.
The Nymex Henry Hub Future Price (June delivery) declined by 9.65% during the week, and its average price was 0.09% above last week’s average price.
In total, natural gas prices, production and storage rose, while consumption and imports fell during the week ending on May 6th.
For further reading:
- Natural gas storage rose for fourth week | EIA review, May 6
- Natural gas storage rose for third week | EIA review, April 29