MARKET WATCH: Natural gas price declines

The front-month price of natural gas fell Apr. 16, wiping out gains from earlier in the week on the New York futures market, after the US Energy Information Administration reported a larger-than-expected injection into underground storage.

Sam Fletcher
OGJ Senior Writer

HOUSTON, Apr. 17 -- The front-month price of natural gas fell Apr. 16, wiping out gains from earlier in the week on the New York futures market, after the US Energy Information Administration reported a larger-than-expected injection into underground storage.

Officials said 21 bcf of natural gas were injected during the week ended Apr. 10. That lifted the working gas in storage to 1.7 tcf, 438 bcf higher than the same time a year ago and 311 bcf above the 5-year average. Analysts were anticipating a smaller injection because of colder-than-normal weather in that period.

The recent falloff in demand for gas indicates a strong injection season in an already oversupplied market, possibly reaching record levels by the end of summer, said analysts in the Houston office of Raymond James & Associates Inc.

In New Orleans, analysts at Pritchard Capital Partners LLC said, "The strong dollar (14% above a year ago) will likely lure incremental LNG imports in the spring and summer with imports rising from 1 bcfd to 1.7 bcfd by July. This will offset declining Canadian imports. Even adjusting for as much as 2 bcfd of switching from coal to gas in the power generation sector, industry will need to shut in as much as 1 bcfd between now and Oct. 1."

Crude prices have risen 12% this year, trading in a tight range, and climbed Apr. 16 to within pennies of $50/bbl. But despite the latest moderate gains, Raymond James analysts said, "Oil prices are set to fall the most this week in over 2 months. For reference, West Texas Intermediate crude is currently trading at a $3/bbl discount to [North Sea] Brent crude as US crude inventories continue to build to record highs."

Olivier Jakob at Petromatrix, Zug, Switzerland, said, "Stronger equities are providing support to crude oil, but the commodity is starting to feel fatigued, pivoting around $50/bbl without any momentum. The last 4 weeks have [each] closed very close to $52/bbl." He said, "The global tripartite correlation trade (oil, dollar index, equities) is also suffering from a dollar index that is supported as well."

However, Pritchard Capital Partners said, "Prices remain firm and maintain a $48-54/bbl trading range despite historically high and increasing crude inventories." The oil market was supported Apr. 16 by an improvement in the US jobless rate, "indicating the pace of economic decline may be slowing," they said.

The US Department of Labor said the number of new jobless claims decreased by 53,000 to 610,000 in the week ended Apr. 11, the lowest number since January. The Federal Reserve also reported economic contractions were slowing or stabilizing in San Francisco, New York, Chicago, Kansas City, and Dallas.

Energy prices
The May contract for benchmark US light, sweet crudes climbed 73¢ to $49.98/bbl Apr. 16 on the New York Mercantile Exchange. On the US spot market, WTI at Cushing, Okla., increased the same amount to the same price. The June crude contract advanced 39¢ to $52.16/bbl on NYMEX. Heating oil for May increased 2.08¢ to $1.42/gal. The May contract for reformulated blend stock for oxygenate blending (RBOB) was up 2.75¢ to $1.47/gal.

Natural gas for the same month dropped 9.4¢ to $3.60/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., declined 4¢ to $3.57/MMbtu.

In London, the June IPE contract for North Sea Brent crude gained 62¢ to $53.06/bbl. Gas oil for May rebounded $9.50 to $457/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes increased 38¢ to $51.55/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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