Futures Pricing --
September 13 natural gas opened today at $3.45 and moved below $3.40 in early action. A sustained break below $3.40 suggests downside potential to support at February's $3.32 and January's $3.08. Volume has been weak indicating traders have left this contract to pursue other commodities.
Continued price weakness is also related to increased crude production and upside action for WTI. Current WTI pricing is at $107.60. We expect natgas futures to remain at current levels with range potential of 10-15 cents. If WTI can break through psychological $100.00, natgas futures will likely revert to pivots around $3.91.
Spot Prices --
Prices fell over the report week in the Northeast as a heat wave subsided. With high temperatures reaching into the upper 90s in the beginning of the report week, the heat in the area drove up wholesale natural gas prices as demand for air conditioning; therefore, natural gas-fueled power generation, spiked.
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 market expectations, which on average were reported to be 46 Bcf.
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.