Futures Pricing --
September 13 natural gas opened today at $3.32 and dipped slightly in early action. A break below $3.32 suggests downside potential to support at January's $3.08. Natural gas in storage has topped the five-year average -- now 5% above -- and this week's aggressive injections represented a 63% increase year-over in additions to storage.
The strong increases in storage are the result of two factors: 1) lower consumption for power burn and 2) starting inventories in April that measured 13% less than year-ago, leaving ample space for injections. Continued price weakness is also related to increased crude production and upside action for WTI. Current WTI pricing is at $104.90 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 --
With continued weather-driven low demand, Henry Hub spot prices declined for the third week in a row. Additionally, natural gas prices at most trading points declined below prices for the previous week, EIA says.
For the Wednesday-to-Wednesday report week, the Henry Hub spot price fell to $3.32 per MMBtu yesterday from $3.46 on July 31, a decline of 14 cents.
Higher power-sector demand raised total consumption 1.0% over last week. Consumption of natural gas for power generation (power burn) increased 5.6% from the previous week, according to Bentek Energy data. Despite rising over week-ago levels, power burn remained 11.3% below levels from two weeks ago, and 21.4% below the same week last year.
All other sectors show declining gas use. Residential and commercial consumption decreased 6.8% week-on-week, and industrial consumption decreased 0.4%. U.S. pipeline exports to Mexico fell week-on-week by 1.0%.
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 much larger than market expectations at 96 Bcf.
Seasonally mild temperatures during the storage report week supported this week's greater-than-average net injection. Temperatures in the Lower 48 states averaged 2.9 degrees cooler than the 30-year normal temperature and 4.9 degrees cooler than the same period last year, and averaged 72.6 degrees for the week, compared to 77.4 degrees last year and the 30-year normal of 75.4 degrees.