Futures Pricing --
August 13 natural gas opened today at $3.70 and moved slightly lower throughout the day mirroring WTI crude's bull run with downside action of its own. Lower natgas futures pricing is based on a production push in crude oil to expand the national crude supply.
Strong resistance is still at the $3.83 mark. Bears' next target is a break below layers at $3.63 and $3.56. But as WTI prices fall, look for natgas futures to rise. Current inventories remain 12.5% less than last year at this time and 1.6% below the 5-year average of 2,832 Bcf.
August natgas settled today at $3.65 all told, down 6 cents on the day. Traders have fled this contract and the short covering that characterized natgas futures for much of the winter and spring has moved to capture profits on crude. But WTI is not likely to offer the pliability that natgas futures do, and once WTI comes back down, we expect the corresponding increases in natgas to woo traders back.
Spot Prices --
Despite intense heat across the rest of the country, price movements were uneventful. The Henry Hub spot price mostly remained flat over the week, rising from $3.67 per MMBtu last Wednesday to $3.70 yesterday. The Henry Hub price increased to $3.78 per MMBtu on Friday, July 19, heading into the hot weekend, but dropped back down to around $3.70 the following trading days. Most pricing points across the Lower 48 states posted single-digit declines or increases over the report week
Consumption increased 0.6% over the report week. Consumption of natural gas for power generation increased less than 1% from the previous week, according to Bentek data. Despite high power consumption levels in the first few days of the report week, closer-to-normal power consumption in the following days led to a small overall weekly increase nationally.
Working natural gas in storage increased to 2,786 Bcf as of Friday, July 19, according to EIA's WNGSR. Although the 41 Bcf gain in storage levels was higher than the 26 Bcf injection that occurred during the same week in 2012, it was lower than the 5-year average increase of 53 Bcf. Current inventories remain 399 Bcf (12.5%) less than last year at this time and 46 Bcf (1.6%) below the 5-year average of 2,832 Bcf.
The net injection was smaller than the market expectations, which on average were reported to be 46 Bcf. Despite the smaller-than-expected injection, natural gas front-month Nymex futures prices fell about $0.04 per MMBtu to just above $3.67 per MMBtu.
Warm temperatures during the storage report week supported this week's less than average net injection. Temperatures in the Lower 48 states were 2.0 degrees warmer than the 30-year normal temperature, 0.1 degrees cooler than the same period last year, and averaged 77.4 degrees for the week, compared to 77.6 degrees last year and the 30-year normal of 75.4 degrees.