From the CME:
By Dominick Chirichella - Fri 26 Jul 2013 07:53:04 CT
The Nat Gas market is heading into the last trading session of the week on the defensive after declining modestly in post inventory report trading on Thursday. The spot Nymex Nat Gas contract (expiring on July 29th) remains in the $3.58/mmbtu to $3.80/mmbtu technical trading range that has been in play since the third week of June. However, the market seems poised for a test of the lower range support level in the not too distant future.
From a technical perspective the market has been range bound for almost a month or during the heart of the summer cooling season (so far). This lack of price direction is certainly the outcome of the inconsistencies of the summer cooling season. There have been bouts of very hot temperatures for relatively short periods of time over confined parts of the US… much as we experienced last week along the north east coast. In fact last week in the New York area the temperatures were approaching the 100 degree F level with temperatures now in this area in the low 70's or almost a 30 degree F reversal in temperatures.
With the Nat Gas market almost entirety weather dependent this time of the year the support coming from the call on Nat Gas for weather related power demand has also been inconsistent. The latest NOAA six to ten day and eight to fourteen day forecasts are still not supportive for a significant call on Nat Gas for power generation to meet cooling needs. For the period July 31st through August 8th there are only minimal pockets of above normal temperatures forecast with large areas of below normal temperatures expected while the rest of the country is likely to experience normal summer like temperatures. Based on the latest forecasts if the actual weather is in sync with the projections weekly Nat Gas inventory injections are likely to over perform during the forecast timeframe.
In this week's EIA Nat Gas weekly Extreme heat in the Northeast and Mid-Atlantic regions last week caused spikes in the price of wholesale natural gas and electric power, as well as near-record consumption of natural gas for power generation. Reaching more than 9.5 billion cubic feet per day (Bcf/d) on July 17 and 18, natural gas used for electric power generation (power burn) came close to its record (for the 8 years for which data are available) of 9.7 Bcf, according to Bentek Energy estimates.
Consumption of natural gas for power generation has been higher this year than the previous five-year (2008-12) average, likely the result of significant declines in the Henry Hub price since 2008. This has contributed to an increase in the gas-fired share of total power generation.
Supply increased very slightly over the report week. Dry production increased by 0.5%, offsetting a 4.3% decline in imports from Canada, according to data from Bentek. In the West and Northeast, pipeline imports were much higher in the first two days of the report week, likely to meet heat-related air conditioning demand, but fell during the remainder of the report week as weather moderated. Production this week was 3.1% greater than the year-ago level.
Consumption increased 0.6% over the report week. Consumption of natural gas for power generation increased less than 1% from the previous week, according to Bentek data. Despite high power consumption levels in the first few days of the report week, closer-to-normal power consumption in the following days led to a small overall weekly increase nationally. Regionally, power consumption increased 2.0% in both the Southeast and the Northeast, the two regions that consume the most natural gas for power generation. Electric power consumption in the Northeast this week exceeded its year-ago level by 4.5%, which is somewhat unusual, since low prices of summer 2012 led to record-high consumption of natural gas for power generation. Residential and commercial consumption increased slightly (though July is a month of minimal demand in these sectors), and industrial consumption remained flat. U.S. pipeline exports to Mexico increased 4.2%.
Tropical Storm Dorian is now located about 700 hundred miles south-southeast of the Cape Verde islands. Currently this pattern is projected to move west- northwest at about 17 MPH. It is projected to remain a tropical storm at least through early next week when it is projected to be in the vicinity of the Caribbean Sea. It is still too early to determine if this weather event will turn out to be something to be concerned about insofar as oil and Nat Gas producing operations in the US Gulf Coast. It is still nine or ten days out from threatening any of the US. For now we will keep it on our radar....MORE