A heat wave in the West drove California prices upward. With forecast temperatures in the 90s for some parts of California and Arizona, prices at the major trading points in the West increased substantially over the report week. The Southern California Citygate price increased 23 cents per MMBtu over the report week, and pricing points in Arizona and New Mexico also saw double-digit increases. Also likely playing a role in price increases were infrastructure constraints; SoCal Gas reduced capacity after declaring force majeure this week due to a maintenance issue at a receipt point in South Needles, California.
Overall natural gas supply declined slightly this week, according to data from Bentek. Dry production declined by 0.2 percent, and imports from Canada fell 5.2 percent. Liquefied natural gas (LNG) imports increased 12.7 percent this week, but averaged 220 million cubic feet per day, remaining a very small portion of the United States’ total supply.
Overall natural gas consumption dropped by 4 percent, as declines occurred in most major consuming sectors. Consumption of natural gas for electric power generation fell 2.7 percent, while residential and commercial use declined 9.5 percent due to weather-related demand declines. Consumption increased 0.2 percent in the industrial sector.
At the NYMEX, the price of the near-month (November 2012) contract was essentially unchanged this report week. The contract fell slightly from $3.475 per MMBtu last Wednesday to $3.470 per MMBtu yesterday. Similar to the Henry Hub spot price, the futures contract rose about 13.6 cents from Wednesday to Friday. The price of the 12-month strip (the average of futures contracts from November 2012 – October 2013) increased to $3.908 per MMBtu from $3.890 per MMBtu last Wednesday
Working natural gas in storage increased to 3,776 Bcf as of Friday, October 12, according to EIA’s WNGSR. This represents an implied net injection of 51 Bcf from the previous week. This week’s injection was 20 Bcf below the 5-year (2007-2011) average injection of 71 Bcf, and 55 Bcf below last year’s injection of 106 Bcf. Inventories are currently 181 Bcf (5.0 percent) greater than last year at this time and 249 Bcf (7.1 percent) greater than the 5-year average.
All three storage regions posted increases this week. Inventories in the East, West, and Producing regions increased by 24 Bcf (the 5-year average net injection is 40 Bcf), 8 Bcf (the 5-year average net injection is 6 Bcf), and 19 Bcf (the 5-year average net injection is 24 Bcf), respectively. In the Producing region, working natural gas inventories increased 11 Bcf (4.2 percent) in salt cavern facilities and increased 8 Bcf (0.8 percent) in nonsalt cavern facilities.