Natural gas prices continued to dwindle during the week until today when natural gas future (July delivery) spiked by over 10%. The sharp drop in rig count (23) might have reheated the natural gas market. There are renewed speculations around a shortage in production along with higher demand this summer that might tighten the natural gas. The cooler than normal weather lowered the consumption of Nat gas in residential/commercial sectors; the total demand also declined. The total supply rose mainly due to an increase in Canadian imports and despite the slight decline in production. The storage levels continue to rise even though at slightly lower rate than a year earlier.
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 June 8th:
Natural Gas Storage
The underground natural gas storage (Billion Cubic Feet) increased again for the eleventh consecutive week; last week the storage levels rose by 2.33% or by 67 Bcf; the storage reached to 2,944 billion cubic feet for all lower 48 states; the current storage is 29.2% above the 5-year average, and is also 31.7% above the storage during the same week in 2011 – this is a decline in the levels of storage that were nearly the 32% mark last week. During the same week in June 2011 the NG injection was 69 Bcf. So the recent injection was very similar. Nonetheless it is the seventh consecutive week in which the injections were lower than the injection during the same week a year earlier. If this trend will continue the storage level will peak around November at 3,900 Bcf, which is a normal storage level.
The rise in storage was primarily because of a 43 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. During the previous week the Henry Hub spot price fell by 1.7% to a weekly average price of $2.33/mmbtu. Furthermore, the Henry Hub price was also $2.5/mmbtu below its price during the same week in 2011.
During last week the average U.S consumption, on a national level, declined by 0.61% (W-over-W).
The residential/commercial sector led the fall with a 14.03% decrease. On the other hand all other sectors rose on a weekly scale including the power sector (up by 6.03%). The total demand for gas is 0.52% below the previous week’s levels but is 6.4% above the same week in 2011.
Production and Imports
Imports fromCanadaincreased again during last week by 7.45%; they were also 11.97% above the levels in 2011.
The gross production edged down last week by 0.05% but is 3.34% above the production level in 2011. As a result, the total supply of natural gas increased by 0.56% during last week.
According to the report the natural gas rotary rig count fell by 23; by the end of last week the number of rigs reached 565.
On a national level, the U.S temperatures were 1.1 degrees cooler than the 30-year normal and 5 cooler than the same period last year.
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