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Natural gas spot prices up in first half
Petroleum News
U.S. natural gas spot prices increased in the first half of the year, the U.S. Energy Information Administration said in a July 22 release.
Average spot natural gas prices increased 40 to 60 percent at most major trading points compared to the first half of 2012, EIA said, attributing the rise in spot prices to demand growing faster than supply. The agency said the increases were relatively uniform across the country except in New England and New York where there were supply constraints which caused the price to spike with winter peak demands. The price difference between most western trading hubs and Henry Hub spot prices averaged less than 10 cents per million British thermal units, EIA said.
Henry Hub, a key benchmark and major trading location, saw prices average $3.75 per million Btu in the first half of the year, up 57 percent from the $2.39 per million Btu average in the first half of 2012. EIA said the year-over-year price increase “principally reflected the extremely low prices of 2012,” with spot prices so far in 2013 similar to levels seen in 2009 to 2011.
Consumption up 3 percent There were colder temperatures than a year ago with natural gas consumption up more than 3 percent through the first half of this year, EIA said. The combined increase in residential, commercial and industrial consumption of 5.6 billion cubic feet per day more than compensated for a decline in power sector consumption of 3.3 bcf per day, resulting in demand rising faster than supply and contributing to upward price pressure.
The winter of 2011-12 was abnormally warm; the winter of 2012-13 had more seasonal winter temperatures, driving residential and commercial consumption in the first half of the year to levels 20 percent above the same period in 2012, with coal recovering some of its market share as gas prices increased, EIA said.
Production gains slowed U.S. dry natural gas production continued to grow in the first half of the year but at a slower pace than in prior years, EIA said. The agency cited Bentek Energy for production figures showing a 1.8 percent growth in the first six months this year compared to 5.6 percent growth in the same period in 2012 and 7.3 percent in 2011.
“Significant production gains that began in 2010 as a result of rapid growth in supply from shale basins began to slow at the beginning of 2012, largely in response to lower prices,” EIA said. “Slowing production growth continued through the first half of 2013, limiting the overhang of supply and resulting in rising prices.”
Storage decreases Large withdrawals of Lower 48 natural gas storage inventories at the end of March, because of cold temperatures in that month, pushed stocks below five-year average levels for the first time since August 2011. EIA said those cold temperatures and high withdrawals continued into April, when storage typically would begin to grow.
“Bigger withdrawals from storage counter-balanced higher total natural gas demand, which was only partially offset by slightly rising dry natural gas production, and as a result inventories fell,” the agency said.
Storage levels remain below their five-year average despite relatively high injection levels in May and June, EIA said, supporting natural gas prices in the $4 per million Btu range.
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