Natural gas prices declined again during most of the week; the publication of the recent EI natural gas report didn’t seem to curb the decline in prices. The total NG demand dropped again during the week mainly due to the decline in the residential/commercial sector’s demand for natural gas. The natural gas production edged up; rig count also increased. The storage levels rose again at a slower pace than last year but were slightly higher than the 5-year average. According to my rough guess at the current pace the storage will still peak around mid-November at around 4,000.
Here is an analysis and short review of the recent changes in U.S natural gas market based on the EIA report for the week ending on October 12th:
Natural Gas Storage
The underground natural gas storage (Billion Cubic Feet) increased for the thirty-second consecutive week; last week the storage levels increased by 1.77% or by 67 Bcf; the storage reached 3,843 billion cubic feet for all lower 48 states; the current storage is 7% above the 5-year average, and is also 4.1% above the storage during the same week in 2011 – these figures were lower than the numbers from the previous week. During the same week in October 2011 the NG injection was 92 Bcf, and the five year average injection for the third week of October was 65 Bcf. Thus, the recent injection was very close to the past years’ average injections but remained lower than last year’s injection. According to my (very) crude estimates, if this trend will continue the storage level will peak around next month at nearly 4,000 Bcf, which will keep the 2012 storage levels higher the past storage levels.
The increase in storage was primarily due to a 28 Bcf injection from the Eastern consumption region storage and the same injection in the Producing region storage.
In the following chart are the shifts (based on weekly numbers) in storage (and Henry Hub spot price between the years 2009 and 2012. As seen, the price of natural gas has had an upward trend in recent months. All awhile the storage levels continue to stock up at a slower pace than in previous years.
During last week the Henry Hub spot price increased again by 1.5% to a weekly average price of $3.31/mmbtu. The Henry Hub price remained $0.31/mmbtu below its price during the same week in 2011.
During last week, the average U.S consumption, on a national level, declined by 2.78% (W-over-W). The consumption was still 0.37% higher than last year.
The residential/commercial sector led the drop with a 4.8% decline; the power sector’s consumption also decreased last week by 2.8%. Finally, Industrial sector’s demand edged down last week by 0.88%. The total demand for gas was down by 2.87% than the previous week levels but was 1.56% above the same week in 2011.
Production and Imports
Imports from Canada fell during last week by 4.73%; they were 7.9% below the levels in 2011.
The gross production edged up last week by 0.27% and was 1.09% above the production level in 2011. As a result, the total supply of natural gas edged down by 0.12% during last week.
According to the report the natural gas rotary rig count rose by 5; by the end of last week the number of rigs reached 427.
On a national level, the U.S temperatures were 1.1 degrees warmer than the 30-year normal but were also 1.3 degrees cooler than last year. The rise in the temperatures may have curbed the rise in the demand for natural gas.
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