Natural Gas Weekly Fundamental Analysis June 4 – 8, 2012, Forecast

Introduction: Natural gas is nevertheless a major commodity in its own right, which is used for everything from cooking food to heating houses during the winter. Natural Gas is growing much faster than either of its non-renewable fossil fuel competitors, oil and coal.

Do not miss the weekly U.S. gas inventories report. The figures are issued by the Energy Information Administration (EIA) every Thursday afternoon at 15:30 (released Friday at 15:30 if there was a U.S. bank holiday on Monday). Here’s a link to the latest EIA report. The main natural gas moving figure in there is the change in inventories from the previous week. When it comes to the gas inventories report, we’re talking about billions of cubic feet, Bcf for short.

When the actual change in inventories number is released, it is the deviation from the expected number that is really important. If the actual inventories figure shows a 24 Bcf rise when an 84 Bcf increase was expected, then that is actually positive for the price of natural gas. All else equal, the price of natural gas should rise after the release.

A barrel of oil has roughly 6 times the energy content of natural gas. If the fuels were perfect substitutes, oil prices would tend to be about 6 times natural gas prices. However, due to various market characteristics discussed briefly above and the ease of using oil, the price of oil has been following a pattern of 8-12 times that of natural gas. However that ratio has spiked dramatically since March 2009.

Weekly Analysis and Recommendation:

Natural Gas fell this week to trade at 2.324. NG has steadily dropped since reaching at recent high of 2.82 just two weeks ago.

Date

Last

Open

High

Low

Change %

Jun 01, 2012

2.324

2.382

2.393

2.314

-2.50%

May 31, 2012

2.383

2.446

2.498

2.376

-2.58%

May 30, 2012

2.446

2.486

2.508

2.396

-1.59%

May 29, 2012

2.486

2.550

2.610

2.466

-2.49%

May 28, 2012

2.549

2.559

2.567

2.530

-0.43%

 

The combination of one of the warmest winters (November-March) in decades and low spot natural gas prices contributed to low wholesale electric prices at major market locations during the winter of 2011-2012 Warm weather kept electric system load low across the East Coast and helped dampen the need for coal-fired generation. Natural gas generation was up significantly to take advantage of low natural gas prices. Reduced nuclear generation due to outages and reduced hydropower generation both served to moderate declining electricity prices in much of the country.

Working natural gas in storage rose last week to 2,815 billion cubic feet (Bcf) as of Friday, May 25, according to the U.S. Energy Information Administration’s (EIA) Weekly Natural Gas Storage Report 

Active natural gas rotary rigs currently total 594, according to the latest weekly data released by Baker Hughes Incorporated. According to Baker Hughes data, natural gas-directed horizontal rigs have driven the decline in total natural gas rigs over the past several months. Horizontal-directed natural gas rig counts have fallen to 411, from levels in the low-600s a year ago.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports.

Historical:

Highest: 6.106 on Jan 07, 2010

Average: 3.989 over this period

Lowest: 1.903 on April 19, 2012

 

Economic Events: (GMT)

WEEKLY

 

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