U.S. Energy Information Administration (EIA) projects working inventories of natural gas in storage will end the heating season at levels significantly lower than last year. This month’s Short-Term Energy Outlook projects that at the end of March, inventories will total 1,959 billion cubic feet (Bcf), which is lower than last year’s record high level but still greater than recent years. Last year at the end of March working inventories totaled 2,477 Bcf, which was the result of robust natural gas production combined with low demand from a warm winter. For much of this winter heating season, inventories have remained greater than the five-year ( 2008-2012) average and below the previous year’s levels.
EIA expects that total net additions to inventories over the 2013 summer injection season (April 1 to October 31) will total 1,961 Bcf. In the past 5 years, the overall net additions to working gas in storage during the injection season have averaged 2,032 Bcf. Due to the high end of winter inventories last year, net injections during the 2012 summer season only totaled 1,453 Bcf.
Natural gas prices rose modestly at most locations during the report week (Wednesday, March 6, to Wednesday, March 13), particularly in New England. Lingering cold temperatures in the Midwest and Northeast likely contributed to the price increases. Temperatures in New England were warmer than normal most days of the previous week, alleviating pressure on the Algonquin Citygate price, which fell from $7.77 per MMBtu last Wednesday to $5.80 per MMBtu on Tuesday. However, on Wednesday, the Algonquin Citygate price increased by 50 percent or $2.89 per MMBtu, likely due to expectations of colder temperatures on Thursday, and ended the week higher than it started at $8.69 per MMBtu. The snow and cold continue to be widespread in the Midwest and Northeast, providing support for the current price environment.
The Nymex April futures price rose from $3.470 per MMBtu last Wednesday to $3.680 per MMBtu yesterday. During the week, the futures price spread over the Henry Hub daily spot price averaged between -10 and 6 cents per MMBtu. The 12-Month Strip (average of April 2013 to March 2014 contracts) gained 16 cents per MMBtu, starting at $3.761 per MMBtu last Wednesday and landing at $3.916 per MMBtu yesterday.
According to estimates from BENTEK Energy Services LLC (Bentek), average natural gas consumption for the nation fell this report week by 11.5 percent over last week’s daily average. Natural gas consumption decreased in all sectors and most notably in the residential/commercial and power sectors, which fell by 15.7 and 12.7 percent, respectively, for the report week. This is the result of warmer weather in most parts of the country compared with the previous week.
Bentek estimates that the average daily natural gas supply for this report week increased modestly by 0.5 percent over the previous week’s daily average. Dry natural gas production and imports from Canada increased by 0.4 percent and 3.3 percent, respectively, from the previous week.