With Gulf of Mexico natural gas production seemingly safe from Tropical Storm Maria and a looming period of decreased demand imminent, natural gas futures ended nearly flat on Wednesday.
Cooler temperatures across the country, in addition to continued power outages following Hurricane Irene, dampened natural gas demand for power burn, with demand declining by slightly over 16 percent across the report period, according to BENTEK Energy Services, LLC. Fall-like conditions were especially apparent in the Midwest, and much of the South saw temperature declines accompany the rains brought by Lee. Over 6.4 million homes lost power during Hurricane Irene, and almost 600,000 homes along the east coast were still without power as of Friday, September 2. According to BENTEK, total consumption was down 6.1 percent, and supply was down 4.2 percent, a combination of a 3.6 percent decline in domestic dry gas production and a 10.9 percent drop in Canadian imports. LNG imports, on the other hand, rose by 4.7 percent and averaged 439 million cubic feet (MMcf) per day over the report week.
Gas production in the Gulf of Mexico is still returning after the shutdowns due to Tropical Storm Lee, though analysts said storms have a smaller effect on the overall natural gas market than in the past. The Gulf accounts for just 7% of total U.S. production, down from 17% in 2008, according to the U.S. Energy Information Administration, as U.S. output has shifted to areas on land.
Gas traders were watching the progress of Tropical Storm Nate, which the National Weather Service said was “meandering over the Bay of Campeche” early Thursday.
Natural gas for October delivery settled 0.2 cent higher, at $3.940 a million British thermal units on the New York Mercantile Exchange, after trading as high as $4.038/mmBtu earlier in the session.
“We’re at a time in the season where we are maximizing inputs into the ground,” said Stephen Schork, head of trading-advisory Schork Group. “We’re probably in for another soft patch in prices.”
The U.S. Energy Information reported working gas in storage was 3,025 Bcf as of Friday, September 2, 2011. Following a net injection of 64 Bcf from the previous week, stocks are now 131 Bcf below last year and 60 Bcf less than the 5-year average. The injection was above last year’s build of 58 Bcf and equal to the 5-year average injection of 64 Bcf.
The East Region registered its fourth consecutive week of above average builds. The region’s deficit to the 5-year average is now in double digits after a build that was 11 Bcf above average. While the East Region remains a significant 96 Bcf below the 5-year average, this gap could close quickly in the shoulder months when heating and cooling demands are low.
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