Natural gas prices resumed their rally in recent days, after they hadn’t done much during last week. The warmer than normal weather is keeping the demand for natural gas higher than last year. Nonetheless, the total demand declined last week mainly due to the decline in the power sector. The natural gas production and rig count decreased. The storage levels continue to rise but at much slower rate than in 2011. At the current pace the storage will peak around early November at 3,800.
Here is an analysis and short review on the latest changes in U.S natural gas market based on the EIA update for the week ending on July 13th:
Natural Gas Storage
The underground natural gas storage (Billion Cubic Feet) rose for the sixteenth consecutive week; last week the storage levels increased by only 0.89% or by 28 Bcf; the storage reached to 3,163 billion cubic feet for all lower 48 states; the current storage is 17.5% above the 5-year average, and is also 19.2% above the storage during the same week in 2011 – this is a decline in the storage levels that were nearly the 19%- 21% mark a week ago. During the parallel week of July 2011 the NG injection reached 60 Bcf and the five year average injection for the second week of July was 69 Bcf. Further, it is the twelfth consecutive week in which the injections were lower than the injection during the parallel week in 2011. If this trend will continue the storage level will peak around early November at 3,800 Bcf, which is a similar storage level in 2011.
The rise in storage was primarily because of a 23 Bcf injection from the Eastern consumption region storage.
In the following chart are the weekly changes in storage (and Henry Hub spot price between the years 2009 and 2012. The chart also shows the moderate pace of natural gas storage increase compared to previous years.
During last week the Henry Hub spot price declined by 0.7% to a weekly average price of $2.82/mmbtu. On the other hand, the Henry Hub price was still $1.59/mmbtu below its price during the same week in 2011.
During last week the average U.S consumption, on a national level, declined again by 1.61% (W-over-W). The consumption was 8.93% higher than last year.
The power sector led the fall with a 2.68% decrease. Further, many other sectors also declined on a weekly scale except for the residential/commercial sector (increased by 0.15%). The total demand for gas was down by 1.82% than the previous week levels but was 8.77% above the same week in 2011.
Production and Imports
Imports from Canada rose during last week by 2.74%; they were 0.17% above the levels in 2011.
The gross production edged down last week by 0.1% but was 3.98% above the production level in 2011. As a result, the total supply of natural gas edged up by 0.07% during last week.
According to the report the natural gas rotary rig count declined by 20; by the end of last week the number of rigs reached 522.
On a national level, the U.S temperatures were 3.3 degrees warmer than the 30-year normal and 0.6 degrees warmer than last year. The higher than normal weather is among the factors in keeping the demand for natural gas higher than last year.
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