Weekly Natural Gas Report -- 11/15/2012

15:13PM Nov 15, 2012

The NYMEX December 2012 contract ended the week up, rising from $3.578 per MMBtu last Wednesday to $3.760 per MMBtu yesterday, an increase of 18.2 cents per MMBtu. Prices dropped early in the report week, falling to $3.503 per MMBtu on Friday, but rose for the balance of the period to finish the week up 5.1%.

The 12-Month Strip (average of December 2012 to November 2013 contracts) closed yesterday at $3.914 per MMBtu, up 15.4 cents per MMBtu (4.1%) for the week.

Certain locations in the Northeast saw prices initially trending significantly lower as much warmer weather followed a Nor’easter that drove temperatures into the thirties early in the reporting week. At the Algonquin Citygate trading point (for delivery into Boston), spot prices started the week at $8.45 per MMBtu, but dropped to $4.52 per MMBtu on Friday before regaining considerable ground on Tuesday and Wednesday, closing at $7.37 per MMBtu -- down 12.8% for the week. Similarly, prices at the Transcontinental Pipeline’s Zone 6 trading point (which serves New York City markets), began the week at $4.04 per MMBtu, fell to $3.43 per MMBtu on Friday and then rose steadily to finish the report week essentially unchanged at $4.03 per MMBtu down 0.2%.

Front-month December natural gas contract trended sideways through the morning before tailspinning 11 cents to the low. A nearly immediate correction found nattie back on the upside at $3.83 at high noon -- before falling sharply right back to the low, testing key support at the close at $3.70, down six cents on the day.

There is plenty of room to the downside. If support at $3.69 is violated, look for front-month nattie to continue to explore the downside.

Henry Hub spot price price registered an overall increase for the week, dipping a combined 14 cents per MMBtu on Thursday and Friday, before climbing to close the week at $3.66 per MMBtu, up 5.5%. Generally moderate temperatures in many locations helped to lower prices early in the reporting week, with prices finishing the week higher ahead of forecasts of colder weather.

Demand/Consumption --

Total consumption for the report week registered an overall increase, with higher residential/commercial demand offsetting a decrease in demand from the power and industrial sectors. According to estimates from Bentek, domestic natural gas consumption rose by 0.4% from last week, driven by an increase of 2.8% in residential/commercial sector consumption.

Power sector consumption finished the week down 2.3%, while industrial sector consumption dipped modestly -- down 0.5%. -week, Residential/commercial sector consumption, higher week-over, exceeding levels for the same week last year -- by 14.1%.

Supply --

Total supply was down for the week, registering an overall decrease of 0.8%, largely reflecting slightly lower dry natural gas production. According to Bentek estimates, domestic weekly dry natural gas production declined 0.4% from the previous week’s volumes -- yet was 1.8% higher than the same period last year. Imports from Canada declined by 6.4%, as a decrease in shipments to the Midwest offset increases in the West and Northeast. For the week, imports from Canada stand moderately below year-ago volumes -- down 3.4%. While liquefied natural gas (LNG) sendout rose 0.8% over last week, sendout volumes remain 37.6% below year-ago levels.

Storage --

Working natural gas in storage decreased to 3,911 Bcf as of Friday, November 9, according to EIA’s WNGSR. This represents an implied net withdrawal of 18 Bcf from the previous week, the first withdrawal for this heating season. In contrast, natural gas was still being injected into storage at this time last year and on average over the last 5 years (2007-2011) at a rate of 20 Bcf and 17 Bcf, respectively. Inventories are currently 71 Bcf (1.8%) greater than last year at this time and 209 Bcf (5.6%) greater than the 5-year average.

Two of the three storage regions posted increases this week, with the West and Producing Regions posting record high natural gas storage volumes. Inventories in the West and Producing regions increased by 3 Bcf (the 5-year average net injection of 3 Bcf) and 2 Bcf (the 5-year average net injection of 10 Bcf), respectively, while the East region posted a decline of 23 Bcf (compared to the 5-year average net injection of 4 Bcf). In the Producing region, working natural gas inventories increased 3 Bcf (1.0%) in salt cavern facilities and remained at the previous week’s level in nonsalt cavern facilities.