Natural Gas Report: Consumption Increases Signal the Open of Air Conditioning Season

June 27, 2013 10:14 AM

Futures Pricing --natgas6 27

August 13 natural gas opened today at $3.74 and slipped to $3.58 and later, $3.56 before retracing to end the day down 15 cents all told at $3.59. The sharp falloff is due to the market's micro-management of this contract and volume rushed to a daytime high near 8,000 at the drop.

Natural gas futures continue to be slave to short positions. Look for volume to carry the keys to this market. Once traders believe a low is in place, they will re-enter and create profits on the ensuing uptrend.

Strong resistance is now at the $3.74 level. A violation of that level would signal upside potential to $3.91. Bears' next target is a break below $3.56, but consumption increased this week and may limit downside action as the nation reaches for the thermostat, placing pressure on the national supply.

Spot Prices --

Natural gas prices fell over the report week at most locations with the exception of price increases in the Northeast. The Henry Hub spot price decreased from $3.93 per MMBtu last Wednesday to $3.72 per MMBtu yesterday.

With warmer-than-normal temperatures arriving on Monday, natural gas prices in the Northeast increased between 10% and 20%. Since Monday, the temperature in Boston has been around 10 degrees Fahrenheit above normal.

Propane, butane, and isobutane spot prices decreased by around 6%. The natural gasoline spot price was down slightly for the week, while the ethane spot price remained unchanged.

Consumption --

Total consumption increased week-on-week with large gains in power demand. According to Bentek Energy Services estimates, total natural gas consumption in the United States increased by 3.0%, driven by an 11.1% increase in the power sector.

Warmer temperatures across most of the country, and the corresponding increase in air conditioning load, likely contributed to the demand increases

Storage --

Working natural gas in storage increased to 2,533 Bcf as of Friday, June 21, according to the U.S. Energy Information Administration's (EIA) Weekly Natural Gas Storage Report.

A net storage injection of 95 Bcf for the week resulted in storage levels 17.1% below year-ago levels, and 1.2% below the 5-year average.

Seasonal temperatures during the storage report week supported this week's net injection. Temperatures in the Lower 48 states were 0.3 degrees warmer than the 30-year normal temperature and 0.6 degrees cooler than the same period last year, and averaged 71.4 degrees for the week, compared to 72.0 degrees last year and the 30-year normal of 71.1 degrees.


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