US natural gas prices move up on 73 bcf storage injection

23 September 2010 21:23  [Source: ICIS news]

HOUSTON (ICIS)--US natural gas inventories grew by a lighter-than-expected 73bn cubic feet (bcf), the government said on Thursday, sending the front-month contract above the $4/MMBtu mark for the first time this week.

The Energy Information Administration (EIA) said in its weekly storage scorecard that total volume underground hit 3,340 bcf in the week ending 17 September, compared with 3,267 bcf in the previous week.

Total stockpiles continued at unrivalled heights, save for 2009's record seasonal build. But the week-over-week growth in stockpiles was slightly below the historical average for the second week of September, and 30 bcf lower than last week's injection delta.

"Cooling demand in the contiguous U.S. picked up last week in the southeastern and central time zones," Stephen Schork, an energy analyst, wrote in his newsletter The Schork Report. "To wit, overall electricity output increased 3.3% from the prior week’s four-month low."

The injection was below analysts' predictions of a build in the high-70s bcf and impacted prices on the futures curve.

The October NYMEX contract added 5.3 cents and closed at $4.019/MMBtu. The second-month benchmark tacked on 6.0 cents for a $4.159/MMBtu finish.

The storage deficit versus 2009 remained around 5%, the EIA said, but 6% above the 2005-2009 historical average.

All three regions added to storage with the east adding 53 bcf, the US Gulf producing region up by 19 bcf and the west tacking on 1 bcf.

With the US season turning to autumn and cooling demand waning, expectations are that natural gas inventories will continue to grow heading into winter and in turn depress prices, which are an important bellwether for chemical commodity prices.

"The looming possibility of much higher-than-average storage injections in the coming weeks may be a recipe for further price weakness leading up to the traditional start of the heating season on November 1," natural gas analyst Martin King wrote in a research note for FirstEnergy Capital.

"At this stage, we see little reason to change this stance as seasonally-adjusted demand has stagnated to a degree, and there appears to be more supply set to hit the market in coming months."'

Natural gas is used widely as a feedstock and power fuel for chemical production.

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