Highlights of the Natural Gas Summary and Outlook for December 14, 2012 follow. The full report is available at the link below.
Natural Gas Summary and Outlook
- Price Action: The market was much lower with prices falling 23.7 cent (6.7%) to $3.314 on a 25.9 cent range.
- Price Outlook: Since 2000, there have been 50 instances where prices established a new low exactly 3 weeks in a row, the current situation. Of those 50 times, 33 went on to establish another new low. With the low of $3.261 and prices settling on a weak note, another new low this week is considered likely. A recent theme has been for the 11-15 day forecast to look for cooler temperatures as the actual temperatures come in well above normal. While this pattern could change, it is worthy of note and as the peak of heating season in mid-January approaches, each day that passes reduces the significance of the potential cold. While temperatures still continue to cool on average, the shortest day of the Northern Hemisphere will occur this week and thus each day will soon begin to lengthen. After mid-January, average temperatures will slowly start to rise with temperatures beginning to warm dramatically after mid-February.
- Weekly Storage: US working gas storage rose 2 BCF for the week ending December 7. Current inventory levels of 3,806 BCF now rise 77 BCF (2.1%) above last year while surpassing the 5 year average by 278 BCF (7.9%).
- Storage Outlook: After slipping to a year on year storage deficit for the first time since November 2011 last week, the build catapulted inventories back to a surplus. Considering the weather forecasts and last year’s storage changes, inventories are not forecast to fall back to a deficit until mid-January.
- Supply Trends: Total supply fell 0.3 BCF/D to 67.9 BCF/D. Lower US production was primarily responsible for the drop as Canadian and LNG imports and Mexican exports were little changed. The US Baker Hughes rig count fell 1 to 1,799 as both oil and natural gas reported a drop in activity with miscellaneous rigs up. Canadian saw a more robust pick up and thus the total North American rig count rose 11 to 2,217, which now trails last year by 333. The higher efficiency US horizontal rig count rose 2 and at 1,105 falls 79 behind last year.
- Demand Trends: Total demand plummeted 10.9 BCF/D to 65.3 BCF/D. Demand fell in all sectors driven by the very mild temperatures. Electricity demand fell 2,046 gigawatt-hrs to 71,513, which trails last year by 7,000 (8.9%) and the 5 year average by 7,457 (9.4%). The bearish trend of lower temperature adjusted power demand has been alleviated to some degree and will be watched closely.
- Other Factors: The S&P 500 index slipped despite positive industrial production. Fears regarding the US fiscal cliff remain in focus.
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