Recent natural gas market activity, including lowered natural gas injection and a decline in temperatures across the United States have contributed to a week-long trend in declining natural gas prices. We’ve also seen a drop in oil producing stocks such as Exxon Mobil (XOM) over the past few weeks suggesting there may be more volatility within the energy markets over the coming weeks, as we continue to see swings of both gains and losses.
Looking at underground natural gas storage activity of 67Bcf, this is far below the year-over-year storage levels from 2011 (89Bcf). Looking at supply, gross natural gas production increased by 1.6% last week, pegging it 1.7% up, year-over-year from 2011. Additionally, imports from Canada decreased creating additional domestic natural gas supply. On the demand side, according to the EIA, natural gas consumption also declined the previous week by 3.7%. This was part of an overall energy sector decline in demand, seen most prominently in a 13.1% decline in Power Sector, week-over-week.
Anytime there is a decline in temperatures during this time of year, we’re going to see a decline in natural gas consumption/demand, resulting in a loosening of the of the natural gas market, until we see a reaction from the supply side – this is what we’re seeing here. Temperatures are forecasted to rebound in the coming week, which should see a bounce-back in natural gas demand, putting upward pressure on the price again. Hurricane season is also coming, and will certainly generate further natural gas production volatility.
With this in mind, now may offer a good opportunity to fix your natural gas cost, creating cost certainty and removing this variable before we see very likely increase in natural gas rates going into the fall and winter seasons.