Natural Gas Storage Increased by only 26 Bcf– July 26th

Natural gas prices didn’t do much during the past few days as they have zigzagged with an unclear trend.  The warmer than normal weather is keeping the demand for natural gas robust. The total demand rose last week mainly due to the rise in the power sector. The natural gas production and rig count continued to decline. The storage levels continue to increase but at a slower pace than in recent years. At the current pace the storage will peak around late October at 3,600.

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) increased for the seventeenth consecutive week; last week the storage levels rose by only 0.82% or by 26 Bcf; the storage reached to 3,189 billion cubic feet for all lower 48 states; the current storage is 15.8% above the 5-year average, and is also 18% above the storage during the same week in 2011 – this is a decline in the storage levels that were nearly the 17%- 19% range a week earlier. During the parallel week of July 2011 the NG injection reached 43 Bcf and the five year average injection for the third week of July was 59 Bcf. Further, it is the thirteenth 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 late October at 3,600 Bcf, which lower than the storage level in 2011.

The rise in storage was primarily because of a 20 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 2011 and 2012. The chart also presents a moderate increase in natural gas storage compared to previous years.

During last week the Henry Hub spot price rose by 3.5% to a weekly average price of $2.92/mmbtu. On the other hand, the Henry Hub price was still $1.66/mmbtu below its price during the same week in 2011.

natural gas prices chart 2011 (Henry Hub Natural Gas storage 2012 July 27Consumption

During last week the average U.S consumption, on a national level, rose by 0.94% (W-over-W). The consumption was 0.85% higher than last year.

The power sector led the rally with a 2.27% gain. Alternatively, many other sectors declined on a weekly scale including the residential/commercial sector (decreased by 2.23%). The total demand for gas was up by 1.16% than the previous week levels and was 1.38% above the same week in 2011.

Production and Imports

Imports from Canada declined during last week by 6.82%; they were 15.43% below the levels in 2011.

The gross production fell last week by 0.67% but was 2.29% above the production level in 2011. As a result, the total supply of natural gas declined by 1.24% during last week.

According to the report the natural gas rotary rig count declined by 4; by the end of last week the number of rigs reached 518.

On a national level, the U.S temperatures were 3.0 degrees warmer than the 30-year normal and 0.9 degrees warmer than last year. The higher than normal weather is among the factors keeping the demand for natural gas robust.

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2 comments for “Natural Gas Storage Increased by only 26 Bcf– July 26th

  1. Joe Brasil
    July 28, 2012 at 4:30 pm

    Hi I’m Joe a rookie trader that really just uses the guessing game to trade, but I think maybe your guessing on the 3600 storage number? why don’t you show your work (data) that displays how you get to 3600? or are you just guessing also?

    • July 29, 2012 at 10:06 am

      Hi Joe,
      I did based my guess on a calculation. Since you have asked I will show it in my upcoming weekly analysis that will be published tomorrow at Seeking Alpha. I will provide a link to the table.

      Regards,

      Lior

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