Natural Gas Update – January 5, 2012

Natural Gas Update – January 5, 2012

Natural Gas Storage Facts

EIA (Energy Information Administration) reported a net withdrawal of 76 Bcf (billion cubic feet) for the week ending December 29, 2011.

Inventories are at 3,472 Bcf, which is up 11.4% or 356 Bcf from last year and 458 above the 5-year average or 15.2%.

www.eia.doe.gov


Despite some significant weather-related price spikes in the Northeast over the New Year’s weekend, natural gas prices fell over the report week at most market locations. The Henry Hub price dropped below $3 per MMBtu on Friday and remained there through the balance of the report week to end the week at $2.96 per MMBtu, eleven cents below its value last Wednesday. Frigid weather in the East, contrasted with milder temperatures in other parts of the country, led to a mixed market over the week with little major movement in prices at most locations. The Chicago citygate price declined steadily over the week from $3.16 per MMBtu last Wednesday to $3.05 per MMBtu yesterday.

Total consumption over the report week was up by 2.5 percent according to Bentek, with the highest increases in residential/commercial consumption, up 3.2 percent. Although residential/commercial consumption dropped through Saturday, it picked up significantly on Sunday, and double digit percentage increases were registered on Monday and Tuesday. By Wednesday, demand had begun to drop off, consistent with the weather pattern in the East over the week.

At the NYMEX, the February 2012 contract posted a small decline over the report week, falling from $3.121 per MMBtu last Wednesday to $3.096 per MMBtu yesterday. The contract price fell below $3 per MMBtu over the Holiday weekend, but moved back above the $3 per MMBtu benchmark yesterday. The 12-month strip (the average of the 12 contracts between February 2012 and January 2013) followed a slightly different pattern, declining only slightly during the week and rising overall for the week from $3.348 per MMBtu last Wednesday to $3.400 per MMBtu yesterday.

Working natural gas in storage fell to 3,472 Bcf as of Friday, December 30, according to EIA’s WNGSR. This represents an implied net withdrawal of 76 Bcf, much smaller than the 5-year average draw of 106 Bcf, as well as last year’s draw of 135 Bcf. Stocks are well above average in all three regions. Relatively warm weather through the week contributed to the reduced withdrawal.

Inventories at the end of the year were at their highest levels for that week since EIA began tracking storage levels. Large production increases throughout the year and generally mild weather through the first months of the heating season have contributed to the record level. The Producing Region stands out at 499 Bcf (71.7 percent) above the 5-year average.

Temperatures during the week ending December 29 were 4.9 degrees warmer than the 30-year normal temperature and 6.0 degrees warmer than last year. All regions with the exception of the West South Central were warmer than normal. The Midwest was particularly warm, with the East North Central and West North Central regions averaging 7.4 and 10.7 degrees warmer than normal, respectively. Heating degree-days nationwide were down 15.3 percent from normal.

www.eia.gov

www.bloomberg.com

12/24-Month Strip (NYMEX) Price

12 Month Strip                        24 Month Strip

$3.29 MMBtu                          $3.63 MMBtu

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