The natural gas prices continue to rise even though the consumption keeps on declining on a national level. This counterintuitive scenario might be due to the aggregation trap, in which on an aggregate level the effects of certain regions on the natural gas market are cancelled, even though certain regions might have high effect on natural gas prices such as the Henry Hub than other regions. Most of the natural gas prices fell during the week but the Henry Hub is the exception.
Here’s a summary of the recent EIA report on U.S natural gas market for the week ending on April 22nd:
Natural gas Storage
The underground natural gas storage (Billion Cubic Feet) increased for the third straight week by 1.9%,; this was a 31 Bcf injection, as the total storage reached 1,685 billion cubic feet for all lower 48 states; the natural gas storage was 11 Bcf below the 5-year average, and 11.3% below the storage level during the same week in 2010.
This storage increase was mainly because of the injection of 14 Bcf from the Eastern Consuming Region natural gas storage.
The chart below shows the total natural gas storage (weekly figures) and Henry Hub spot price changes during 2011; notice that last week, natural gas prices bounced back after they had fell for two straight weeks.
During 2011 (up to date), the weekly percent changes of these two data series have a 0.32 correlation, i.e. at 32% 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 -0.019.
U.S. natural gas consumption fell by 5.4% during the week, and the residential and commercial sectors’ consumption led the decline with a 11.9% decrease.
Production and Imports
The production of natural gas moderately inclined by 0.5% compared to last week, as it reached 64.1 Bcf per day.
The imports of natural gas from Canada on the other hand moderately declined and were set at 6.0 Bcf per day, as they were 8.8% below the same week last year.
The US temperatures reached a weekly average of 53.9 degrees, which was colder than last year by 1.7 degrees, but the same level as normal for the week ending on April 21st. Nonetheless, there were regional differences and in the regions where the weather was colder than normal, the demand for natural gas was higher – these regions were mostly high consuming natural gas to begin with; The West North Central Region was the coldest region when compared with its relative to normal temperatures at 6.6 degrees below the historical average.
The high crude oil prices might have also contributed to the reliance on natural gas for heating over oil based heating such as propane.
Prices for the week ending April 22nd
Natural gas spot price (Henry Hub) increased from beginning to end of the week by 6.57% and reached 4.33$/mmbtu on Thursday; Its average daily change was 1.22%, and its weekly average was 3.07% above the previous week’s average price.
The Nymex Henry Hub Future Price (May delivery) rose by 2.36% during the week, and its average price was 3.64% above last week’s average price.
In total, natural gas prices, production and storage rose, while imports and consumption fell during the week ending on April 22nd.
For further reading:
- Natural gas storage rose for second week | EIA review, April 22
- Natural gas storage finished the week on a rise | EIA review, April 15
- Natural gas storage declined | EIA review, April 8
- Natural gas market rallied last week – EIA report April 1