HardAssetsInvestor

Written by Sumit Roy  |

July 21, 2011

Natural Gas Report: Upside Limited Despite Summer Heat

Details

Production surge will likely keep natural gas prices in established range for the medium term.

The Energy Information Administration reported that operators injected 60 billion cubic feet of natural gas into storage in the week ending July 15, 2011. That was close to estimates that were calling for an injection between 59 bcf and 62 bcf, but above last year’s build of 51 bcf and the five-year average of 53 bcf.

Thus, the inventory deficit against last year and the five-year average fell for the fifth straight week to 220 bcf and 81 bcf, respectively. These injections into storage are part of the yearly cycle of natural gas supply and demand, and insufficient supplies going into storage now can mean shortages in the future during peak demand.

After the report, natural gas prices fell and were last trading near $4.40/mmbtu. Prices for the fuel have been trapped in a relatively narrow range over the last several months, which can be seen from the chart below.

The weather last week was warm, but seasonal. Cooling degree days came in at 86, the same as last week and close to last year’s 89 CDDs in the same period. There were 90,273 GWh of electricity generated during the week, up 4.1 percent week-over-week, but down 2.1 percent year-over-year, according to the Edison Electric Institute.