Natural Gas Report: Prices Follow Air Conditioning Demand

July 18, 2013 09:59 AM

Futures Pricing --

August 13 natural gas opened today at $3.62 and moved as high as $3.84 as EIA reported increased consumer demand for air conditioning resulting in a net injection roughly half the size of last week's addition. Summertime demand will be high as temperatures and humidity soar across the nation.

Strong resistance is now at the $3.83 mark. Bears' next target is a break below layers at $3.63 and $3.56. But as temperatures climb, look for natgas futures to rise to meet the demand. Current inventories remain 13.1% less than last year at this time and 1.2% below the 5-year average of 2,779 Bcf and trends suggest pricing will look for demand weakness before returning to the downside.

August natgas settled today at $3.80 all told, up 17 cents on the day.

Spot Prices --

Natural gas spot prices were generally flat or down, with the exception of the Northeast. Henry Hub spot prices ended the reporting week at $3.67 per MMBtu, 2 cents below the previous Wednesday's close. Big price increases occurred in the Northeast late in the report week because of unusually hot summer weather. The spot price at the Algonquin Citygate rose to $7.46 per MMBtu on Wednesday, July 17, up from $4.23 per MMBtu on July 10.

Consumption --

Total consumption rose for the report week. Consumption in all sectors was up for the report week. The power sector, which consumes the most gas during summer months, consumed 5.8% more gas compared with last week; the residential and commercial sectors consumed 3.1% more; and the industrial sector consumed 0.1% more, according to Bentek Energy data.

Storage --

Working natural gas in storage increased to 2,745 Bcf as of Friday, July 12, according to EIA's WNGSR. Although the 58 Bcf gain in storage levels was higher than the 29 Bcf injection that occurred during the same week in 2012, it was lower than the 5-year average increase of 70 Bcf. Current inventories remain 414 Bcf (13.1%) less than last year at this time and 34 Bcf (1.2%) below the 5-year average of 2,779 Bcf.

The net injection was smaller than the market expectations, which, on average, were reported to be 65 Bcf. Natural gas prompt-month Nymex futures prices increased about $0.10 per MMBtu to just below $3.79 per MMBtu immediately following WNGSR's release.

Temperatures during the storage report week were warmer than normal. In the Lower 48 states, temperatures were 2.9 degrees warmer than the 30-year normal temperature and 1.6 degrees cooler than the same period last year. Temperatures averaged 77.7 degrees for the week, compared to 79.3 degrees last year and the 30-year normal of 74.9 degrees.


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