Relatively low demand during the month of December and the beginning of January contributed to the low prices. December 2012 was the 10th warmest on record, according to recent NOAA reports, with seasonally warm temperatures particularly east of the Rocky Mountains. Temperatures in December averaged 36.4 degrees nationwide, 3.4 degrees greater than the long-term average. Mild weather has persisted into January as well. The warm December was evident in the weekly natural gas storage withdrawal; the five-year average (2007-2011) withdrawals for December 2012 are all over 100 Bcf. A triple digit withdrawal did not occur until the week ending December 28, 2012; additionally, the WNGSR reported a net injection of 2 Bcf for the week ending December 7, 2012. While this is not unprecedented, there are only two other net injections in December on record (1998 and 2005).
Both natural gas supply and consumption fell during the report week. According to data from Bentek Energy LLC, total supply fell by 0.2 percent, with a 0.4 percent decline in dry production. LNG sendout and pipeline imports from Canada increased during the week. Supply is down 1.5 percent from the same time last year. Consumption fell 8.0 percent this week, with a 12.8 percent decline in residential and commercial natural gas consumption. Residential and commercial consumption, however, was 14.4 percent greater than this time last year, although last winter was one of the warmest on record. Use of natural gas for power generation and industrial consumption also fell this week.
The NYMEX near-month (February 2013) natural gas contract fell 12 cents per MMBtu during the report week to $3.113 per MMBtu. During its tenure as the near-month contract, the February contract fell 35.6 cents per MMBtu. Last year, the February 2012 contract remained below $3 per MMBtu during most of its time in the near-month position. The 12-month strip (the average of the contracts from February 2013 through March 2014) for this report week lost a little more than 10 cents per MMBtu, falling from $3.504 per MMBtu last Wednesday to $3.403 per MMBtu yesterday.
Working natural gas in storage decreased to 3,316 Bcf as of Friday, January 4, according to EIA's WNGSR. This represents an implied net withdrawal of 201 Bcf from the previous week, the largest withdrawal for this heating season. This week's net withdrawal was 69 Bcf larger than the 5-year average net withdrawal of 132 Bcf, and 111 Bcf larger than last year's net withdrawal of 90 Bcf. Inventories are currently 88 Bcf (2.6 percent) less than last year at this time and 320 Bcf (10.7 percent) greater than the 5-year average.