Natural Gas Report: Spot Prices Climb as Mercury Drops

December 12, 2013 08:36 AM
 

 Brrrrr

  • Inventories stand at 3,533 Billion cubic feet (Bcf) -- 7.2% below year-ago and 3.0% below the five-year average.
  • This week notes an 81 Bcf net withdraw from storage marking another larger weekly draw than was expected -- 72 Bcf larger than the draw at the same time last year.
  • Frigid temperatures and strong export sendouts limited injections to storage.
  • Midwestern propane supply constraints led to elevated propane pricing. Click here for more...

 

January 14 natural gas opened today at $4.345 and tested resistance at $4.434 before falling back. We are targeting April 29's $4.444 as tough resistance and today's action suggests that level may hold. A downside breech of $4.00 would signal downside risk to $3.91 and below that,$3.62.

The average temperature in the continental United States during the report week was 41.9 -- 6.3°F cooler than the same time last year and 1.6°F below the 30-year average temp. Roughly two-thirds of the nation is under a massive arctic air mass and the cold weather accounts in part for the net withdrawl. Further supporting prices is reduced gas production due to seasonal freeze-offs. Picture1

"Total natural gas supply fell by 0.8% for the report period on lower levels of production. U.S. dry gas production decreased 3.3% this week following well freeze-offs. Widespread freeze-offs occurred in the Piceance Basin in Utah and Wyoming, the Uinta Basin in Utah, the San Joaquin Basin in California, and the Williston Basin in North Dakota. This was partly offset by imports from Canada, which were up 30.5% for the report period. The Midwest and Northeast both imported about 1 Bcf/day more natural gas from Canada yesterday compared with last Wednesday. LNG imports, which are a minor part of supply, were also up," according to EIA

Production declines amid very cold temperatures threaten to hold natgas futures high until production resumes, temperatures warm and net injections can refill storage.

Prices --Jan14nattie12 12

The Henry Hub spot price rose 36 cents from $3.88/MMBtu last Wednesday to $4.24/MMbtu yesterday. Prices are likely to remain elevated near-term as inventories continue to fall and are now behind the five-year average for all three reporting U.S. regions.

Consumption --

Consumption rose 33.4% from the previous week, led by a 46.1% increase in residential/consumer demand. "The largest percentage increases in electric-sector consumption of natural gas came from the Midwest and the Midcontinent, up 183% and 155%, respectively. Texas, the second-largest electric-sector gas consuming region, increased by 73% and saw the largest volumetric increase, and the Southeast, which is most reliant on electricity for home-heating, consumed 20% more natural gas to generate electricity," notes EIA.

Storage --

Working natural gas in storage fell to 3,533 Billion cubic feet. The 81 Bcf net decline in storage levels comes on the heels of the largest net November decline EIA has noted since 1994.

According to EIA, "The net withdrawal reported for the week ending December 6 was 81 Bcf, 73 Bcf larger than last year’s withdrawal of 8 Bcf and 5 Bcf larger than the 5-year average withdrawal of 76 Bcf. Current inventories totaling 3,533 Bcf are 273 Bcf (7.2%) less than last year at this time, and 109 Bcf (3.0%) below the 5-year (2008-12) average."



Data & indicated text provided by EIA.

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