The EIA issued its weekly report regarding the natural gas market in the U.S. for the week ending on January 14th:
Natural gas spot price fell during that week, also consumption and natural gas storage declined, while the temperatures fell below normal average. Here are the highlights of the report along with my input:
Natural gas spot price (Henry Hub): the weekly average fell last week compare to its previous week by 1% reaching an average price of 4.46 USD/MMBTU a fall of 4 cents per MMBTU.
This decline in price is mostly attributed to the decline in consumption as will be presented herein.
Despite the cold weather (see below) there was a decline in natural gas consumption: on January 13th the consumption was at 107.4 Billion cubic feet – a peek in demand which then followed by a decline in demand as the week continued; Consumption remained below 90 Bcf during last week.
The weather in the US was colder than the season normal weather for the week ending on January 13th: the average U.S. temperatures were slightly colder than normal with a weekly average of 28.3 degrees – 4.7 degrees below normal, and 6.4 degrees below the pervious week.
These opposite directions in which consumption falls (along with prices) while the average temperatures were lower than normal, could be because the extreme cold weather was during a single day (as suggested above) and the following days were relatively hotter so people used less heating gas in those days as they got used to the cold weather (variation of the law of relativity…).
Natural gas Storage
In my last review about U.S. natural gas storage, there was a drop of 4.5% in underground natural gas storage (Billion Cubic Feet); according to the recent report figures for the week of 14th of January presented a much higher decline of 8.2%, which is a decline of over 243 billion cubic feet. This withdrawal of natural gas is the sixth highest since 2002, and according to the EIA, is higher than the five year average of 133 BcF.
A suggested reason for the rapid decrease in storage as consumption didn’t rise much could be due to the supply side:
Production didn’t rise in the passing week and the import of Canadian gas declined by 4% compare to previous week. These two factors could explain the sharp fall in storage despite the decline in consumption.
That being said, the working gas storage is still higher by 78 Bcf than last year’s level or the five-year average. The natural gas storage reached a total of 2,716 billion cubic feet for all lower 48 states, which is higher by 109 billion cubic feet for a similar time in 2010.
Finally, consider that there was a decline of 12 natural gas rigs to 902 on January 14th – the lowest level since February 2010.
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