Natural Gas Update – January 19, 2012

Natural Gas Update – January 19, 2012

EIA (Energy Information Administration) reported a net withdrawal of 87 Bcf (billion cubic feet) for the week ending January 13, 2012.

Inventories are at 3,290 Bcf, which is up 19.6% or 539 Bcf from last year and 566 above the 5-year average or 20.8%.

With few exceptions, natural gas prices dropped substantially at most market locations. The Henry Hub price continued declines from last week, falling 32 cents over the week to end yesterday at $2.49 per MMBtu. Most other pricing points that posted declines fell by similar amounts, in the 20 to 30 cents range. A relatively warm winter so far, as well as higher-than-average storage levels, has put downward pressure on natural gas prices this year.

At the NYMEX, prices dropped to lows not seen in almost 10 years. The near-month (February 2012) futures contract fell from $2.774 per MMBtu last Wednesday to $2.472 yesterday. The 12-month strip, the average of the 12 contracts between February 2012 and January 2013, declined from $3.114 per MMBtu last Wednesday to $2.848 per MMBtu yesterday.

Working natural gas in storage fell to 3,290 Bcf as of Friday, January 13, according to EIA’s WNGSR. This represents an implied net withdrawal of 87 Bcf. Stocks were 566 Bcf higher than the 5-year average level, as well as 539 Bcf higher than last year at this time. Inventories in the Producing Region stand out at 276 Bcf (31.1 percent) above the 5-year average of 888 Bcf. Stocks in the East and West Regions were above their 5-year averages by 224 Bcf (15.2 percent) and 66 Bcf (18.0 percent), respectively.

The implied net withdrawal was 46% lower than the 5-year average withdrawal for the week, likely due to warmer-than-normal weather. In all three regions, the net withdrawals for the week were significantly lower than the 5-year average. The implied net withdrawal of 15 Bcf in the Producing region was 70% lower than the 5-year average. Implied net withdrawals in the East and West Regions were 33% and 48% lower than the 5-year average, respectively.

Temperatures during the week ending January 12 were 9.1 degrees warmer than the 30-year normal temperature and 13.1 degrees warmer than the same period last year. At the national level, the average temperature was higher than the 30-year average by a greater margin than the last 9 weeks of warmer-than-normal temperatures. During the week all regions were warmer than normal, particularly the West North Central and East North Central regions in the Midwest averaging 13.7 and 13.6 degrees warmer than normal, respectively. Heating degree-days nationwide were down 28.8 percent from normal.

12/24-Month Strip (NYMEX) Price

12 Month Strip                        24 Month Strip

$2.73 MMBtu                          $3.09 MMBtu

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