Natural gas prices hiked during the past several days. The total NG demand rose during the week mainly due to the rise in the demand in the industrial sector. The natural gas production rose and the rig count also increased. The storage levels rose again at a slower pace than last year but at a slightly faster pace than the 5-year average. According to my rough guess at the current pace the storage will peak around November at 4,000.
Here is an analysis and short review of the recent developments in U.S natural gas market based on the EIA report for the week ending on September 20th:
Natural Gas Storage
The underground natural gas storage (Billion Cubic Feet) increased for the twenty-eighth consecutive week; last week the storage levels increased by 2.29% or by 80 Bcf – the highest injection in 2012; the storage reached 3,576 billion cubic feet for all lower 48 states; the current storage remained 8.6% above the 5-year average, and is also 9% above the storage during the same week in 2011 – this figure is slightly lower than the figure from last week. During the parallel week of September 2011 the NG injection was 111 Bcf but the five year average injection for the third week of September was 75 Bcf. Thus, the recent injection was lower than last year but slightly higher than past years’ average injections. According to my (very) crude estimates, if this trend will continue the storage level will peak around the middle of November at nearly 4,000 Bcf, which is higher than the storage level in 2011.
The rise in storage was primarily due to a 44 Bcf injection from the Eastern consumption region storage.
In the following chart are the shifts (based on weekly figures) in storage (and Henry Hub spot price between the years 2011 and 2012. The chart presents the recent recovery of natural gas prices. All awhile the storage levels continue to stock up at a slower rate than the previous year.
During last week the Henry Hub spot price decreased by 4.2% to a weekly average price of $2.76/mmbtu. The Henry Hub price remained $1.01/mmbtu below its price during the same week in 2011.
Consumption
During last week the average U.S consumption, on a national level, rose by 2.6% (W-over-W). The consumption was also 10.84% higher than last year.
The residential/commercial sector led the rise with an 11.71% gain. Indusial sector’s demand also rose last week by 1.43%. On the other hand, the power sector’s demand decreased last week by 1.05%. The total demand for gas was up by 3.02% than the previous week levels but was 11.39% above the same week in 2011.
Production and Imports
Imports from Canada rose during last week by 4.63%; they were 1.93% above the levels in 2011.
The gross production slipped last week by 0.05% but was 1.21% above the production level in 2011. As a result, the total supply of natural gas increased by 0.26% during last week.
According to the report the natural gas rotary rig count rose by 6; by the end of last week the number of rigs reached 454.
On a national level, the U.S temperatures were 0.9 degrees cooler than the 30-year normal but 2 degrees warmer than last year. The drop in the temperatures may have curbed the growth in the demand for natural gas.
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