More than midway through the winter heating season (November 1 – March 31), working inventories of natural gas in storage remain at significant margins above previous years’ levels. Current storage levels are more than 600 billion cubic feet (Bcf) above the five-year (2007 – 2011) average for this week in the year; and since September 2011, the difference between the current storage level and the five-year average has generally been increasing. (Until September, stocks were at a deficit to the five-year average). Current stocks exceed previous years’ levels as well as the five-year average in all three storage regions.
The The abundance in storage inventories is the result of reduced natural gas consumption this year due to a warm winter, and expanded production. This has reduced the need to pull natural gas from storage to meet winter heating demand. As a result of these factors, natural gas prices have come close to 10-year lows. As the heating season comes to an end, storage levels could fall at a more rapid pace, as some inventory owners bring stocks down to required end-of-season balances.
(For the Week Ending Wednesday, February 1, 2012)
- Natural gas prices posted net declines during the report week, as patterns of unseasonably warm weather continued across much of the country. The Henry Hub spot price dropped from $2.61 per million British thermal units (MMBtu) last Wednesday to $2.32 per MMBtu yesterday.
- At the New York Mercantile Exchange, the March 2012 contract moved into the near-month position. The contract dropped from $2.769 per MMBtu last Wednesday to $2.382 per MMBtu yesterday.
- Working natural gas in storage fell last week to 2,966 Bcf as of Friday, January 27, according to the U.S. Energy Information Administration’s (EIA) Weekly Natural Gas Storage Report (WNGSR). The implied net withdrawal for the week was 132 Bcf.
- The natural gas rotary rig count, as reported by Baker Hughes Incorporated on Friday, January 27, fell by 3 rigs to 777. The oil rig count, on the other hand, rose by 2 rigs to 1,225.
Natural gas prices declined in most market locations over the week, as most parts of the country experienced a few days of spring-like weather. At the Henry Hub, the spot price of natural gas declined 29 cents during the report week, to end yesterday at $2.32 per MMBtu. Punxsutawney Phil, apparently bullish on natural gas, saw his shadow this morning, predicting six more weeks of a winter that hasn’t yet seemed to materialize. Six weeks of winter would be a reversal from the spring-like temperatures much of the country saw this week. High temperatures were in the 60s and 70s across much of the South for the report week.