Natural Gas Update

September 21, 2012 04:57 AM

The NYMEX near-month natural gas contract (October 2012) fell about 30 cents, from $3.063 per MMBtu last Wednesday to $2.762 per MMBtu yesterday. The 12-month strip (the average of the 12 contracts between October 2012 and September 2013) declined to $3.353 per MMBtu from $3.510 per MMBtu last week.

Spot price for natural gas at Henry Hub was down $0.26 from $2.96 over the week to $2.70. Futures prices fell along with spot prices; NYMEX near-month October contract fell $0.301 to $2.762. Working natural gas storage increased by 67 Bcf to 3,496 Bcf - 320 Bcf over a year ago. Rotary rig count fell by 4 to 448 active units.


Lower demand for air conditioning drove demand for natural gas downward. Henry Hub price climbed above $3 to $3.01 for the first time since early August before ending the week at $2.70. Prices around the Nation followed a similar path with the exception of Algonquin Gas customers in the Boston area where major pipeline maintenance took place. Northeast price jumped $1.47 to $4.52 per MMBtu before ending the week at $3.72.


Natural gas consumption fell 3.7 over the week led by consumption for power generation which was down 13.1% on reduced air-conditioning demand. Electric power generation was softer over the week in the Southwest region, lower by 9.8%. Residential and commercial consumption rose 12.9%, partially offsetting generation declines. Industrial demand up over the week 1.5%.


Total supply is up 1.3% on the week. Declines in Canadian imports to the West and Northeast pushed dry production 1.6% higher. Liquefied natural gas (LNG) sendout up 13.3% to an average of 224 million cubic feet per day but LNG production remains at historic lows, 44% below sendout for the previous year.


Inventories in storage are up 320 Bcf (10.1%) over same time last year and 278 Bcf (8.6%) over the 5-year average to 3,496 Bcf. Increases posted in all three storage regions amounted to a 44 Bcf increase in natural gas storage.

The big story in natural gas will be the effect temperatures have on demand. Temps over the week were slightly cooler than this time last year but 0.3 degrees warmer over the 30-year average. The National Weather Service Climate Prediction Center (CPC) released its projection for the next 3 months this week predicting the next 90 days to be warmer and drier than in a typical year. (Click here for more on the CPC outlook)



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