Prices at most trading locations fell through most of the report week, then jumped on Wednesday. The Henry Hub price dropped from $4.10 per MMBtu last Wednesday to a low for the report week of $3.85 per MMBtu on Tuesday, and back up to $3.97 per MMBtu yesterday. The mid-week price declines resulted from forecasts for cooler weather and continued power outages from Hurricane Irene, which later was downgraded to Tropical Storm Irene. Decreasing every day of the report week but the last day, prices at Transcontinental Pipeline’s Zone 6 trading point for delivery into New York City dropped from $4.35 per MMBtu last Wednesday to $4.08 per MMBtu on Tuesday. This pattern was similar across the country.
Hurricane Irene dampened natural gas demand for power burn during the report week, and demand loss continues as power infrastructure is repaired. According to data from BENTEK Energy Services, LLC, gas burn for power fell about 3 percent during the report week. Total demand was down 0.8 percent, and supply remained flat, as slight production increases were offset by declines in Canadian imports. BENTEK expects demand loss from the storm will total about 2.8 Bcf total.
Two newly formed weather disturbances likely played a role in Wednesday’s price rally. Hurricane Katia, currently a Category 1 storm, might impact the U.S. east coast next week, but any projected path is still highly uncertain. The National Hurricane Center noted that Katia could become a major hurricane by the weekend. Meanwhile, a tropical system in the central Gulf of Mexico could become a tropical depression during the next 24 hours. Energy producers active in the area have been monitoring the storm and according to recent news reports have begun evacuating non-essential personnel from offshore platforms and have shut in small amounts of production.
The October 2011 contract moved into the near-month spot, and rose from $3.889 per MMBtu last Wednesday to $4.054 per MMBtu yesterday. The September contract closed at $3.857 per MMBtu on August 29, having lost 38.7 cents, or about 9 percent, during its tenure as the near-month contract. When the October contract settled yesterday at $4.054 per MMBtu, this was the first time in over two weeks that the near-month contract closed above $4 per MMBtu. The 12-month strip (the average of the 12 contracts between October 2011 and September 2012) rose from $4.421 on August 24 to $4.431 yesterday.