05 June 2009 23:53 [Source: ICIS news]
HOUSTON (ICIS news)-- Lower chemical production levels in the US has helped cause a glut of feedstock natural gas, sources said on Friday.
US inventories of natural gas climbed by 5.6% last week with stocks increasing by 124bn cubic feet (bcf) to a total of 2,337 bcf, according to weekly data from the Energy Information Administration (EIA).
Last week's natural gas inventory levels were 30.5% higher than the same time last year and up by 22.1% from the five-year average.
Kevin Swift, chief economist for the American Chemistry Council (ACC), said the glut of natural gas has been helped by chemical producers using less of the fuel for steam cracking.
Industrial gas consumption, which includes chemical feedstock use, was down in March by 12% year over year, according to the EIA's monthly natural gas report.
Natural gas use in the industrial sector fell in the first three months of 2009 by 13% from the same time last year and by 9% from 2007.
Oil and gas services company Baker Hughes said on Friday that the number of North American natural gas rigs in operation is down 53% from last year, underscoring the drop in industrial and chemical production.
Baker Hughes said that 700 units in the US and Canada were in operation as of 6 June, down drastically from 1,493 drilling operations at the same time last year.
Falling rig counts come as a result of US natural gas storage levels US that exceed seasonal and historical averages.
“The United States has been blessed with an abundant supply of natural gas – more than 100-years worth at traditional usage levels," Jeff Schrade, spokesman for the Natural Gas Supply Association (NGSA) said.
"In the shorter tem, last year we had a tremendous number of wells being completed and that, coupled with the downturn the economy and mild weather, has brought us where we are today, with abundant levels of natural gas.”
Natural gas futures prices have been low in response to the heavy builds in US storage with front-month prices hovering around $4/MMBtu on the NYMEX.
Last year, natural gas futures traded higher than $13/MMBtu.To discuss issues facing the chemical industry go to ICIS connect
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