Since April 27, injections of working natural gas into underground storage have fallen short of both year-ago levels and the 5-year (2007-2011) average. A warmer than normal winter, particularly in March, positioned natural gas inventories 927 billion cubic feet (Bcf) above the 5-year average near the end of the natural gas storage withdrawal season (which traditionally ends on March 31). Since then, the slower pace of injections has narrowed the overhang. While still significantly high, the surplus level dropped to 666 Bcf above the 5-year average on June 1.
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The U.S. Energy Information Administration (EIA) expects this trend will continue through the end of the injection season. EIA’s current Short-Term Energy Outlook projects that inventories will end the injection season at the end of October at 4,015 Bcf, which is 329 Bcf above the five-year average end-of-October levels.
At the NYMEX, the July 2012 contract fell from $2.421 per MMBtu last Wednesday to $2.185 per MMBtu yesterday, a decrease of 23.6 cents per MMBtu (9.7 percent) over the period. The July 2012 contract led the futures market decline with a 9.7 percent loss on expectations that hotter weather (and greater consumption) was still elusive. The 3-Month Strip (average of July-August-September contracts) followed suit with a 23.8 cent per MMBtu (9.6 percent) loss for the week.
Movement in the Henry Hub day-ahead price reflected a widespread decrease in market prices in this week’s cash market by falling 9.5 percent, from $2.41 per MMBtu the previous Wednesday to $2.18 per MMBtu yesterday. As the Spot Prices tab on the left shows, the Henry Hub cash price fell beginning last Thursday. During the same period, numerous other spot market pricing points exhibited similar losses.
Nearly all downstream trading locations registered lower prices as consumption dropped modestly this week. Spot prices at Transcontinental Pipeline’s Zone 6 trading point for delivery into New York City, which started the week at $2.54 per MMBtu, lost $0.21 per MMBtu over the week (Wednesday to Wednesday) to close at $2.33 per MMBtu (down 8.3 percent). Over the same period, the Chicago citygate spot price registered a 25-cent per MMBtu price loss (from $2.45 per MMBtu last Wednesday), ending the week at $2.20 per MMBtu (down 10.2 percent).
Despite increased natural gas use for power generation, total domestic consumption decreased slightly. According to estimates from BENTEK Energy LLC (Bentek), domestic natural gas consumption fell by 0.6 percent from last week. The residential/commercial sector led the decrease, posting a 14.0 percent decline, while the industrial sector registered a 0.9 percent decrease. The power sector, however, showed a partially offsetting 6.0 percent week-over-week gain attributed to increased power burn in key regions including the Northeast, Midwest, Southeast, and Midcontinent.