The prices of natural gas prices changed directions several times during the week, but they are slightly higher than last week. The upcoming Northeast storm raises the potential effect it could have on the gas pipelines. According to the recent publication of the EIA natural gas report the total NG demand rose again mainly due to the sharp increase in the residential/commercial sector’s demand for natural gas. The natural gas production slipped; rig count rose. The storage levels rose again at a slower pace than in 2011 and the 5-year average. According to my 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 developments in U.S natural gas market based on the EIA report for the week ending on November 2nd:
Natural Gas Storage
The underground natural gas storage (Billion Cubic Feet) increased for the thirty-fourth consecutive week; last week the storage levels rose by 0.54% or by 21 Bcf; the storage reached 3,929 billion cubic feet for all lower 48 states; the current storage is 6.6% above the 5-year average, and is also 2.9% above the storage during the same week in 2011 – the gap between last year’s level, the 5-year average and current level continues to narrow. During the same week in November 2011 the NG injection was 37 Bcf, and the five year average injection for the last week of November was 27 Bcf. Thus, the recent injection was lower than the past years’ average injections and last year’s injection. According to my (very) crude estimate, 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 slightly higher the past storage levels.
The rise in storage was primarily due to a 8 Bcf injection from the Western consumption region and Producing Region storage (each).
In the following chart are the changes (based on weekly numbers) in storage (and Henry Hub spot price between the years 2011 and 2012. As seen, the price of natural gas has risen in the past several months. All awhile the storage levels continue to increase at a slower pace than in previous years.
During last week, the Henry Hub spot price rose again by 0.9% to a weekly average price of $3.44/mmbtu. The Henry Hub price remained only $0.03/mmbtu below its price during the same week in 2011.
During last week, the average U.S consumption, on a national level, increased by 7.47% (W-over-W). The consumption was also 4.95% lower than last year.
The residential/commercial sector led the rally with a 22.85% gain. The rise in consumption might have been due to the cold weather and the rise in number of heating degrees days (the highest in recent years); the power sector’s consumption on the other hand declined last week by 3.72% – probably due to power shortage in the Northeast because of Hurricane Sandy. Finally, Industrial sector’s demand rose last week by 1.62%. The total demand for gas increased by 7.01% than the previous week levels and was 5.21% above the same week in 2011.
Production and Imports
Imports from Canada rose during last week by 1.16%; they were 6.04% below the levels in 2011.
The gross production decreased last week by 0.46% but was 1.76% above the production level in 2011. As a result, the total supply of natural gas declined by 0.95% during last week.
According to the report the natural gas rotary rig count rose by 8; by the end of last week the number of rigs reached 424.
On a national level, the U.S temperatures were 1 degrees cooler than the 30-year normal but were also 1.3 degrees warmer than last year.
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