Natural Gas

Overview:

(For the Week Ending Wednesday, September 19, 2012)

• Natural gas prices declined at most trading locations this week, erasing gains from last week. The spot price at the Henry Hub fell from $2.96 per million British thermal units (MMBtu) last Wednesday, September 12, to $2.70 per MMBtu yesterday, September 19.
• Natural gas futures prices declined along with spot prices. The New York Mercantile Exchange (NYMEX) near-month contract (October 2012) fell from $3.063 per MMBtu last Wednesday to $2.762 per MMBtu yesterday.
• Working natural gas in storage rose last week to 3,496 Bcf as of Friday, September 14, according to EIA's Weekly Natural Gas Storage Report (WNGSR). An implied storage build of 67 Bcf for the week positioned storage volumes 320 Bcf above year-ago levels.
• The natural gas rotary rig count, as reported by Baker Hughes Incorporated on September 14, fell by 4 to 448 active units.

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Prices:

Natural gas prices declined in most market locations, likely reflecting lower demand for air conditioning. At the Henry Hub, natural gas prices fell 26 cents from $2.96 per MMBtu last week to $2.70 per MMBtu yesterday. A steady decline began on Friday, following a small increase near the beginning of the report week. The Henry Hub price increased to $3.01 per MMBtu in trading on Thursday, rising above $3 for the first time since early August. Most prices around the country followed a similar pattern to the Henry Hub with exceptions in the Northeast, where prices at New England trading points increased as a result of major pipeline maintenance on Algonquin Gas Transmission's system. The price at the Algonquin Citygate, which serves Boston-area consumers, rose to $4.52 per MMBtu on Monday, an increase of $1.47 per MMBtu from the previous trading day. The price increase was short-lived; by Wednesday the Algonquin price had fallen back to $3.72, a net increase of 1 cent per MMBtu for the whole week.

U.S. consumption fell 3.7 percent this week, according to data from Bentek Energy. Consumption of natural gas for power generation declined 13.1 percent, reflecting reduced air-conditioning demand as summer temperatures continued to subside. Natural gas consumed for electric power generation declined by 9.8 percent in the Southeast, the largest regional consumer of natural gas for power generation. Residential and commercial consumption rose 12.9 percent, partially offsetting the declines in power burn. The rise in residential and commercial consumption reflects increases in heating demand in some areas of the country. Industrial demand also rose slightly over the week, by 1.5 percent.

Total supply rose by 1.3 percent over the report week. Dry production rose by 1.6 percent, and was partially offset by declines in Canadian imports to the West and Northeast. Liquefied natural gas (LNG) sendout rose 13.3 percent, averaging 224 million cubic feet per day. Despite the week-over-week increase, LNG sendout is at a historically low level, and close to 44 percent below sendout for the same week last year.

At the NYMEX, the price of the near-month contract (October 2012) fell about 30 cents, from $3.063 per MMBtu last Wednesday to $2.762 per MMBtu yesterday. The 12-month strip (the average of the 12 contracts between October 2012 and September 2013) declined to $3.353 per MMBtu from $3.510 per MMBtu last week.

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Storage

Working natural gas in storage increased to 3,496 Bcf as of Friday, September 14, according to EIA's WNGSR. This represents an implied net injection of 67 Bcf from the previous week. This week's injection was 6 Bcf below the 5-year (2007-2011) average injection of 73 Bcf, and 22 Bcf below last year's injection of 89 Bcf. Inventories are currently 320 Bcf (10.1 percent) greater than last year at this time and 278 Bcf (8.6 percent) greater than the 5-year average.

All three storage regions posted increases this week. Inventories in the East, West, and Producing Regions increased by 44 Bcf (the 5-year average net injection is 48 Bcf), 3 Bcf (the 5-year average net injection of 8 Bcf), and 20 Bcf (the 5-year average net injection of 17 Bcf), respectively. In the Producing Region, working natural gas inventories increased 10 Bcf (4.8 percent) in salt cavern facilities and increased 10 Bcf (1.1 percent) in nonsalt cavern facilities.

Temperatures during the storage report week were 0.3 degrees warmer than the 30-year normal temperature and 0.9 degrees cooler than the same period last year. Temperatures in the lower 48 States averaged 69.4 degrees, compared to 70.3 last year and the 30-year normal of 69.1 degrees. While overall temperatures were a little warmer than normal, temperatures varied somewhat across Census divisions. The Pacific Census division in the West was particularly warm, averaging 3.6 degrees warmer than the 30-year normal. Temperatures in both the East North Central and East South Central Census divisions were cooler than the 30-year normal by a degree.

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See also:

• Natural Gas Analysis Reports
• Short-Term Energy Outlook