Natural gas prices didn’t rise in recent days as they did a couple of weeks back. The warmer than normal weather is keeping the demand for natural gas robust compare to last year. Nonetheless, the total demand slipped last week mainly due to the decreased demand in the power sector. The recent rally in natural gas prices may have contributed to the rise in natural gas production and rig count. The storage levels continue to rise but at much slower pace than a year earlier. At the current pace the storage will peak around 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 6th:
Natural Gas Storage
The underground natural gas storage (Billion Cubic Feet) increased for the fifteenth consecutive week; last week the storage levels rose by only 1.06% or by 33 Bcf; the storage reached to 3,135 billion cubic feet for all lower 48 states; the current storage is 19.7% above the 5-year average, and is also 21.2% above the storage during the same week in 2011 – this is a decrease in the storage levels that were nearly the 25%- 27% mark a couple of weeks ago. During the same week in July 2011 the NG injection was 84 Bcf and the five year average injection for the first week of July was 90 Bcf. Further, it is the eleventh 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 3,800 Bcf, which is a similar storage level in 2011.
The increase in storage was primarily because of a 20 Bcf injection from the Eastern consumption region storage.
In the following chart are the weekly developments in storage (and Henry Hub spot price between the years 2009 and 2012. The chart also shows the slower pace of natural gas storage build up than in previous years.
During last week the Henry Hub spot price rose by 2.9% to a weekly average price of $2.84/mmbtu. On the other hand, the Henry Hub price was still $1.46/mmbtu below its price during the same week in 2011.
During last week the average U.S consumption, on a national level, decreased by 0.95% (W-over-W). The consumption was also 11.47% higher than last year.
The power sector led the fall with a 2.56% decrease. On the other hand all other sectors rose on a weekly scale including the residential/commercial sector (increased by 1.22%). The total demand for gas was down by 1.05% than the previous week levels but is 11.75% above the same week in 2011.
Production and Imports
There seems to have been a shift in recent weeks as the growth of imports fell while the gross production picked up. Perhaps the recent rally of natural gas prices contributed to this shift.
Imports from Canada slightly increased during last week by 0.87%; they were 3.7% above the levels in 2011.
The gross production rose last week by 1.03% and is 4.58% above the production level in 2011. As a result, the total supply of natural gas increased by 1.09% during last week.
According to the report the natural gas rotary rig count rose by 8; by the end of last week the number of rigs reached 542.
On a national level, the U.S temperatures were 5.1 degrees warmer than the 30-year normal and 2.6 degrees warmer than last year. The higher than normal weather is among the key factors in raising the demand for natural gas in certain sectors as indicated above.
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