The natural gas market cooled down last week as natural gas prices fell, along with the demand for natural gas.
Here’s a summary of the recent EIA report on U.S natural gas market for the week ending on April 8th:
Natural gas Storage
The underground natural gas storage (Billion Cubic Feet) increased by 1.8%, i.e. an injection of 28 Bcf, as the total storage reached 1,607 billion cubic feet for all lower 48 states; the natural gas storage was 10 Bcf above the 5-year average.
This storage increase was mainly because of the injection of 21 Bcf from the Producing Region natural gas storage.
The chart below shows the total natural gas storage (weekly figures) and Henry Hub spot price changes during 2010-2011; notice that during last year, around this time, the natural gas storage started to puck up. This should occur this year as well, however due to the longer than usual cold weather, it takes longer.
During 2011 (up to date), the weekly percent changes of these two data series have a 0.34 correlation, i.e. at 34% of the time as the storage levels dropped in a certain week the price also declined. During the same time last year, the correlation was -0.10. In chart below of just 2011 figures you can notice the positive correlation between these two set of series.
U.S. natural gas consumption was only 58.2 Bcf per day, and the residential and commercial sectors’ consumption reached 20.4 Bcf per day as it fell during last week by 21% compared to the previous week’s average consumption. This movement is partly due to the warmer weather in the Northeast.
Production and Imports
The production of natural gas moderately declined and reached 64 Bcf per day last week.
The imports of natural gas from Canada to the US continued to drop.
The rising demand for natural gas from Japan isn’t likely to affect the natural gas market in the US as its demand is already in a downward trend in the past several weeks and its production is on the rise.
The weather in the US was warmer by 1.6 degrees than the season normal for the week ending on April 7th, and 7.3 degrees cooler than the same week last year, as the U.S. temperatures reached a weekly average of 51.3 degrees. Nonetheless, there were regional differences: most regions were warmer except for in the South Atlantic and the East South Central as they showed cooler than normal weather.
Prices for the week ending April 8th
The Henry Hub future price (May delivery) shed from its value during April so far 7.4%, while spot price decreased by 6.0%; the week ended with the Henry Hub backwardation reaching 0.02$/mmbtu.
Natural gas spot price (Henry Hub) also decreased from beginning to end of the week by 3.56% and reached 4.06$/mmbtu on Friday; Its average daily change was -1.23%, and its weekly average was 3.3% below the previous week’s average price.
In total, natural gas storage rose, and natural gas prices, imports, consumption and production declined during the week ending on April 8th.
For further reading:
- Natural gas storage declined | EIA review, April 8
- Natural gas market rallied last week – EIA report April 1
- Natural gas market bounces back | EIA review, Mar 25