Movement in the Henry Hub day-ahead price reflected the decline of other trading locations in this week’s cash market by falling 12.4 percent from $3.55 per MMBtu the previous Wednesday to $3.11 per MMBtu yesterday. As the accompanying table shows, the Henry Hub cash price progressed steadily downwards with five days of consecutive losses as end-use markets cut back on immediate gas consumption.
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At the NYMEX, the December 2011 contract fell 30.8 cents (8.4 percent) over five consecutive days from $3.652 per MMBtu last Wednesday to $3.344 per MMBtu yesterday. Over the same period, the January 2012 and February 2012 natural gas futures contracts dropped 26.6 cents and 26.5 cents per MMBtu, respectively, illustrating the potential impacts high storage levels coupled with continued robust production could have on gas prices this coming winter.
All trading locations responded with lower prices stemming from lack of weather load this week. Spot prices at Transcontinental Pipeline’s Zone 6 trading point for delivery into New York City, which started the week at $3.82 per MMBtu, showed a 34 cent price loss per MMBtu over the week (Wednesday to Wednesday) to close at $3.48 per MMBtu (down 8.9 percent). Over the same period, the Chicago citygate spot price registered a somewhat larger 41 cent per MMBtu price loss (also from $3.82 per MMBtu last Wednesday) and ended the week at $3.41 per MMBtu (down 10.7 percent).
In the midst of generally mild fall temperatures and the absence of any significantly colder weather load, consumption posted a modest decrease for the week. According to estimates from BENTEK Energy Services, LLC (BENTEK), domestic gas consumption decreased by 2.4 percent over last week. The residential/commercial sector led the decline with a 5.3 percent loss while the industrial sector tallied the only gain with a 0.4 percent increase. The power sector posted a 1.2 percent drop reflecting the light weather load at the end of last week.
Consistent with the week’s lethargic consumption pattern and clear price slide, overall supply was off slightly. According to BENTEK estimates, the week’s overall average total gas supply posted a 0.4 percent decrease from last week’s level. Domestic weekly dry gas production averaged 63.5 Bcf per day, 0.5 percent lower than the previous week. Domestic dry gas production now stands 8.4 percent above this time last year. The slight fall in this week’s dry gas production was partially offset by a 0.6 percent increase in Canadian imports which averaged 4.7 Bcf per day over the period. Canadian imports stand 3.4 percent above year-ago volumes for the same week. There were modest supply gains registered in the liquefied natural gas (LNG) arena during the week where imports averaged 408 million cubic feet (MMcf) per day and remain 34.6 percent below year-ago levels.