Natural Gas Report: Weak Demand Builds Storage, Lowers Futures Price

May 9, 2013 11:22 AM

Pricing --

June 13 natural gas opened today at $3.98 and threatened established support at $3.91. But traders saw this as an opportunity to enter on short positions which buoyed the contract to $4.01, closing today at $3.97.

We suggested support for this contract last week at $3.91 and that has held true. Next support lies at $3.75 set back on March 14, 2013, but we expect June nattie to stay within a ten cent range with limited upside potential as EIA reports falling demand for the second straight week.

Nymex futures prices as well as spot prices across the country declined for the report week. The Henry Hub price declined by $0.44 per MMBtu over the report week to close at $3.86 per MMBtu yesterday. Most of this decline occurred during trading on Friday, when prices closed $0.31 per MMBtu lower than the prior day’s close. The Henry Hub price continued this downward trend with small daily declines through the remainder of the report week.

Consumption --

Total demand decreased moderately for the report week. According to BENTEK Energy Services LLC estimates, overall natural gas consumption in the United States decreased by 3.2 percent. The overall decline was led by significantly lower natural gas consumption in the power sector, down 7.2 percent versus the previous week.

Storage --

Working natural gas in storage increased to 1,865 Bcf as of Friday, May 3, 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 69 Bcf and 30 Bcf, respectively. Inventories are currently 737 Bcf (28.3 percent) less than last year at this time and 99 Bcf (5.0 percent) below the 5-year average of 1,964 Bcf.


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