Highlights of the Natural Gas Summary and Outlook for December 10, 2012 follow. The full report is available at the link below.
Natural Gas Summary and Outlook
- Price Action: The market was marginally lower with prices falling 1.0 cent (0.3%) to $3.551 on a 24.1 cent range. The low weekly range is misleading with Tuesday seeing prices soar over 16 cents while Friday dropped more than 11.
- Price Outlook: Weather forecasts in general continue to indicate moderate temperatures through mid-December. Although there are now suggestions that late December may turn cold, early December has been well above normal. The bulk of the heating season still remains. However, if weather related demand does not materialize quickly, prices are headed much lower. Considering the weak close, any moderation in weather forecasts is likely to precipitate further price weakness.
- Weekly Storage: US working gas storage fell 73 BCF for the week ending November 30. Current inventory levels of 3,804 BCF now fall 27 BCF (0.7%) below last year while surpassing the 5 year average by 168 BCF (4.6%). Storage levels fell below last year for the first time since November 2011.
- Storage Outlook: The year on year storage deficit is the first since November 2011 and developed primarily due to the significant level of electricity generation related demand. However, data suggests a meaningful portion of this demand may be lost at current price levels and unless weather related demand increases, price pressure may develop.
- Supply Trends: Total supply rose 0.3 BCF/D to 68.1 BCF/D. Lower US production was more than offset by higher Canadian imports. Mexican exports edged higher. The US Baker Hughes rig count fell 11 to 1,800 as both oil and natural gas reported a drop in activity. Although Canadian activity picked up, the total North American rig count fell 4 to 2,206, which now trails last year by 285. The higher efficiency US horizontal rig count fell 7 and at 1,110 falls 48 behind last year.
- Demand Trends: Total demand soared 10.7 BCF/D to 75.8 BCF/D. Demand rose in all sectors driven by colder temperatures. Electricity demand rose 4,479 gigawatt-hrs to 73,559, which trails last year by 136 (0.2%) and the 5 year average by 144 (0.2%). There continues to be evidence of a drop in temperature adjusted power demand, a quite bearish factor. Temperatures on average will continue to fall, with an expected increase in heating related demand, until mid to late January.
- Other Factors: The S&P 500 index rose moderately as the US jobs report was above expectations. However, previous revisions were negative and the labor force participation rate fell.
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