Natural Gas Report -- Futures Fall Off

May 2, 2013 05:49 AM

Pricing --

Natural gas prices were nearly flat across the report week (Wednesday to Wednesday). Many price points increased by just a few cents per million British thermal units (MMBtu), with the exception of Northeastern points, which rose more substantially. The Henry Hub closed at $4.25 per MMBtu yesterday, up 1 cent for the week.

June 13 natural gas opened today at $4.31 after spiking yesterday to $4.43. A swath of winter weather across the nation's midsection may spur some fresh demand, and as supplies are generally low against last year's levels, we see upside potential to $4.43. But a move below $4.23 could signal downside potential $4.10.

As market action has heated up this morning, the June 13 natural gas contract (10:45 am CT) fell, as expected to $4.11 -- that's a 22 cent decline just since I started typing this report. Traders are now likely to seek an entrance back into short positions as the spate of cold weather could set off another round of profit-taking.

Given these new developments, I still like $4.43 as strong resistance. Next support lies at April 4's low of $3.91.

Consumption --

Total demand for the report week was down slightly. According to Bentek estimates, overall natural gas consumption in the United States decreased by 1.1 percent. The residential/commercial sector consumed 1.9 percent more gas for the report period. Industrial consumption of natural gas also increased somewhat, up 0.6 percent for the report week.

Natural gas consumption for power generation was down on average, falling by 6.1 percent.

Storage --

Working natural gas in storage increased to 1,734 Bcf as of Friday, April 19, according to EIA's WNGSR. This represents an implied net injection of 30 Bcf from the previous week. Inventories are currently 807 bcf -- 31.8% below year-ago and 5.1% below the five-year average. We could see a net withdrawal next week however as the Midwest can't seem to shake winter temperatures.


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