News / Business
EIA Storage Report Pushes Natural Gas Prices to Below $3
The front-month natural gas NYMEX contract dipped to below $3 per MMBtu for the first time since August 15, 2002 even though the weekly storage report was significantly lower than last year’s injection.
At 10:30 a.m. Eastern Standard Time (EST), immediately following the release of the storage report by the Energy Information Administration (EIA) for the week ending August 14, 2009, the September 2009 natural gas NYMEX contract dipped to below $3 per MMBtu for the first time since August 15, 2002. Surprisingly, while this weekly injection was low in comparison to last year’s injection of 82 Bcf, the market discarded it.
Does the lower injection mean demand is rebounding? Does it mean the declining drilling rig count has finally caused a reduction in production or supply? “We don’t believe the answer to either of these questions is yes and that is how the market is also interpreting this data,” says Valerie Wood, President of Energy Solutions, Inc. “Last week’s heat wave caused a lot of air conditioning demand, and air conditioning demand is met through the firing up of natural-gas fired electric generation. So, it would make sense that this week’s injection would be lower because demand from the electric generation sector was higher. Relative to production or supply decreases, there isn’t a lot of consistent data yet that indicates production is falling. However, we believe that producers realize that maximum storage levels are getting much closer and therefore, we would expect storage owners to reduce injections in an effort to avoid mandatory curtailments caused by dangerously high pipeline pressures.”
Storage injections typically taper off in the last month of the injection season simply because of injection restrictions and a reduced amount of space. “We expect this tapering off to occur earlier than normal this year,” says Wood. “The fact remains that fundamentals are bearish – tropical storms haven’t been a threat, storage inventories will reach record levels, and demand is down. This isn’t expected to change in the near future.”
Learn more about day-to-day price changes in natural gas by visiting Energy Solutions’ Daily Natural Gas Price Report.
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About Energy Solutions, Inc.
Formed in 1996, Energy Solutions, Inc. is independently owned. With more than 25 years of experience in the natural gas industry, our team focuses on natural gas prices and in helping businesses improve their internal processes for the purchase of natural gas.
