The winter starting to exit the States, and we can see it by the cascading drop in both supply and demand for natural gas, causing for an ongoing decline in natural gas spot price.
Let’s examine the recent EIA weekly report regarding natural gas market in the U.S. for the week ending on February 18th:
Prices for the week ending February 18th
Natural gas spot price (Henry Hub) reached 3.85$/mmbtu at the end of the week – a 1.03% decline from beginning to end of the week. On average, it fell by 0.56% on a daily basis, and the average weekly price was 6.6% below the average weekly price in the previous week. This small fall during the week shows that the big fall came at the beginning of the week compare to last week.
The Nymex Henry Hub Future Price (March delivery) also declined last week by 1.27% from beginning to end of the week; and its average price was 2.3% lower than last week’s average price.
Natural gas Storage
The decline in natural gas storage continues: last week (of 18th of February) there was a drop in underground natural gas storage (Billion Cubic Feet) for the fourteenth straight week, this time by 4.2%, a decline of 81 billion cubic feet; this draw, however, was much smaller than last week’s draw (233 billion cubic feet) and the 5-year average draw of 148 BcF; furthermore, the natural gas storage was lower than the five year average by 61 BcF.
The natural gas storage reached a total of 1,830 billion cubic feet for all lower 48 states, which is lower by 23 billion cubic feet for the same week in 2010; this is also the lowest level since April 2010.
The extreme cold weather continues to subside in the U.S., causing a fall in natural gas consumption in many regions in the U.S.: the average daily consumption in the US dropped by 8% compare to the previous week; the main cause for this due to the decline in power consumption combined consumption by 22.3% for the week of February 18th, compare to the previous week.
Domestic production of natural gas continued to decline in the passing week: according to BENTEK, natural gas production had declined by 1.6% form last week, reaching an average of 66.4 BcF per day. There was also a drop of 17.4% in Canadian imports of natural gas (6.2 BcF per day).
Therefore the drop in consumption even more so than the decline in production, might be responsible for the plummeting of natural gas spot price as the month of February progresses.
The weather in the US was warmer than the season normal for the week ending on February 18th: the average U.S. temperatures were warmer than normal with a weekly average of 40.1 degrees – 7.4 degrees above last year’s temperatures, and 3.6 degrees below the 5-year average.
In total, there is fall all across the boarder for natural gas storage, consumption production and prices.
For further reading (in this site):
- Natural gas spot price in 2010 and projection to 2011
- Natural gas prices outlook for February 2011
- Natural gas prices outlook– 24 February
- Natural gas consumption declines despite cold weather | EIA review, Feb 18
- Natural gas production freeze on cold weather | EIA review, Feb 12
- Natural gas consumption | EIA review, February 4
- Natural gas consumption shows a sharp rise | EIA review, January 28