Natural Gas Report: Demand and Consumption Falter, Futures Lower

May 30, 2013 11:09 AM

Pricing --

July 13 natural gas futures opened the day today at $4.18, dipping to strong support at $4.01 -- settling 15 cents lower on the day at $4.04.natgas5 30

We expect the contract to move sideways, just long enough to establish a plateau before traders pump up the action once again. Consumption and demand are both reported down week-over by EIA and that may weigh on the contract.

A move below 4 dollars would signal downside potential to $3.91. That has been a strong point of support, and a move below that level would signal an opportunity to book natural gas for fall.

If prices move below $3.91, be prepared to fill up to 50% of fall nat gas needs.

Spot Prices --

According to EIA, For most locations, spot natural gas prices were almost flat or slightly down for the report week. The Henry Hub price fell by $0.01 per MMBtu to $4.15 per MMBtu yesterday.

The Nymex futures price fell slightly over the report week. The June Nymex contract moved from $4.186 last Wednesday to $4.148 per MMBtu yesterday, a decrease of $0.038. Similarly, the price of the 12-month strip decreased from $4.333 to $4.283 per MMBtu yesterday, falling $0.05.

Consumption --

Total demand decreased during the report week. According to data from BENTEK Energy Services LLC, overall U.S. demand fell by 2.1 percent for the report week due to cooler weather.

Natural gas consumption for power generation fell by 16.8 percent -- 33.3 percent below year-ago levels.

Storage --

Working natural gas in storage increased to 2,141 Bcf as of Friday, May 24, according to EIA's WNGSR. This represents an implied net injection of 88 Bcf from the previous week. Both the 5-year average and year-ago stock changes for the week were implied net injections of 92 Bcf and 72 Bcf, respectively.

Inventories are currently 664 Bcf (23.7%) less than last year at this time and 88 Bcf (3.9%) below the 5-year average of 2,229 Bcf.


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