Natural gas prices are continuing an overall upward trend, and natural gas spot prices rose during the week ending June 16, according the EIA’s Natural Gas Supply Weekly Update. The agency reported that the upward trend is likely in response to the summer-like temperatures across much of the country and increasing crude oil prices.

Natural Gas Spot Prices Jun 10-16 2010

Source: http://tonto.eia.doe.gov/oog/info/ngw/ngupdate.asp


The largest price hikes occurred at trading locations that serve markets in Florida. The Florida Gas Transmission location posted an increase of $1.03 on the week, ending trading in mid-June at $8.27 per MMBtu, marking the highest price of any trading location in the Lower 48 States. Market locations in the Northeast also registered some sizeable increases, with Dracut, Massachusetts, and several market locations located along the Transcontinental Pipeline increasing between 43 and 57 cents per MMBtu. Overall, prices at market locations in the Northeast averaged $5.42 per MMBtu, rising by an average of 8%.

Prices in the Rockies and west of the mountain range also increased on the week; however, the increases were significantly lower than those in the eastern half of the country. Price increases were limited to 3 cents (1%) at locations serving California and the Pacific Northwest, despite summer-like temperatures. These relatively small increases in natural gas prices may have been partly the result of limited natural gas demand for electric power generation in the area.

For example, the Bonneville Power Administration (BPA), which owns and operates much of the Pacific Northwest hydropower plants, reported that storms occurring in May and June contributed to high water flow. The surge in rainfall has resulted in an increase in hydropower generation, displacing other fuels in the Pacific Northwest. Some electric power generated in the Pacific Northwest is being exported to California and other States. Prices at market locations in the Rocky Mountains increased by up to 6 cents on the week, and remained the lowest prices in the country at an average of $4.23 per MMBtu.

Summer-like temperatures across much of the country, particularly in the East and South, likely led to the 5% increase in natural gas demand for electric power generation for the report week. However, overall U.S. demand fell by 1% in that same time, despite the week-to-week increase in power burn, according to estimates from BENTEK Energy Services, LLC. Residential and commercial demand fell by 14% compared with the previous week, while industrial demand decreased roughly 2%.

Total natural gas supply was fairly flat compared with the previous week, increasing by 0.2%. Natural gas supply remained stable despite the jump in liquefied natural gas (LNG) imports in the report week, which rose by more than 11% over the pervious week, according to BENTEK estimates. Domestic production remained robust, exceeding 60 Bcf per day in 5 out of the 7 days last report week. However, a 5% decrease in Canadian imports offset increases in LNG imports and production, resulting in a weekly net increase of only 0.2%.

On the NYMEX, the price of the near-month contract for July delivery rose by 30 cents during the report week to $4.978 per MMBtu, increasing in four of the week’s five trading sessions. On Monday, June 14, the price of the July contract traded at $5.006 per MMBtu, the first time a near-month contract has exceeded $5 per MMBtu since February 19, 2010. Prices for the remaining contracts for delivery through the end of the next heating season (through March 2011) also all increased by between 14 and 30 cents per MMBtu, with the contracts for delivery during the summer months registering the largest increases. The 12-month strip increased 16 cents over the previous week, ending trading yesterday at $5.355 per MMBtu.

Working gas in storage totaled 2,543 Bcf as of June 11, according to the EIA. The implied net injection during the report week was 87 Bcf, bringing the current level of supplies in underground storage to 14% above the 5-year average (2005-2009). The net injection of 87 Bcf was about 4% higher than the 5-year average net injection, but fell short of last year’s net injection by about 23%.