After extremely hot temperatures last month receded some, natural gas demand for power generation decreased below last year’s levels. Despite this week’s declines, power burn this summer has been at historically high levels, partly because of a much warmer-than-normal July. In particular, the Southeast has shown large year-over-year increases in power burn. Southeast power burn peaked this summer at 12.5 billion cubic feet (Bcf) per day on July 26, according to BENTEK Energy LLC (Bentek) data.
According to NOAA, temperatures over much of the United States are forecasted to be above normal in the next weeks, which may result in a rebound of natural gas demand for power generation. NOAA predicts high temperatures in the 90s and above over much of the country in the next few days.
(For the Week Ending Wednesday, August 1, 2012)
- Natural gas prices increased modestly for the report week (Wednesday to Wednesday) at many of the country’s trading locations, with an exception at the Algonquin Citygate trading point (for delivery into Boston), which registered an increase of 39 cents per million British thermal units (MMBtu). The Henry Hub price closed at $3.20 per MMBtu, up 1 cent for the week.
- The natural gas futures market trended steadily higher over the week. At the New York Mercantile Exchange (NYMEX), the September 2012 natural gas contract gained 12 cents per MMBtu to close at $3.171 per MMBtu yesterday.
- Working natural gas in storage rose last week to 3,217 Bcf as of Friday, July 27, according to the U.S. Energy Information Administration’s (EIA) Weekly Natural Gas Storage Report (WNGSR). An implied storage build of 28 Bcf for the week positioned storage volumes 472 Bcf above year-ago levels.
- The natural gas rotary rig count, as reported by Baker Hughes Incorporated on July 27, declined by 13 to 505 active units. Meanwhile, oil-directed rigs increased by 2 to 1416 units.
Natural gas prices increased modestly over the report week at most spot market locations. At most trading points across the country, spot prices increased less than a nickel for the week. Moderate temperatures in most regions over the week contributed to the low price variance. The largest price increase occurred at Algonquin Citygate trading point (for delivery into Boston), which increased by 11 percent from $3.58 per MMBtu last Wednesday to $3.97 per MMBtu yesterday. A forecast of warmer-than-normal temperatures for New England likely contributed to the increase.