Natural gas prices are responding to hotter temperatures and lower-than-average storage injections.
“Natural gas prices have been rallying, but the current supply and demand fundamentals are not yet ready to support a sustained natural gas price surge,” stated Valerie Wood, President of Energy Solutions, Inc. in the June 2012 Monthly Advisor.
The year-over-year storage surplus, while receding, is still 680 Bcf higher than it was one year ago. In fact, storage inventories are at 72% of maximum workable capacity. This means that weekly injections this year can only average around 75% of last year’s weekly injections to avoid hitting the maximum capacity levels in storage. This is hardly a long-term bullish situation.
However, lingering above-normal temperatures are clouding the supply and demand fundamentals right now. As above-normal temperatures are blanketing much of the U.S., the power sector is using a higher level of natural gas to meet rising air conditioning needs. Meanwhile, economic data isn’t pointed toward renewed demand as the May jobs report was very disappointing. The unemployment rate for May notched up .1%, returning to 8.2%, there is talk of another round of quantitative easing by the government, and manufacturing indices indicate the economy is slowing. All in all, there is nothing that points to runaway natural gas prices, so recent price strength is viewed solely as a technical price correction.
Additional information about natural gas price trends, storage inventories, demand issues, production levels, rig counts, and much more can be found in the Monthly Edition of The Advisor. Take a FREE, no-obligation 60-day trial to The Advisor and receive the most recent Weekly Edition, as well as the Monthly Edition for June, which contains additional insight into bearish, bullish and neutral factors that affect pricing within the Natural Gas Industry. Learn more by visiting www.energysolutionsinc.com.
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About Energy Solutions, Inc.
Formed in 1996, Energy Solutions, Inc. is independently owned. With more than 50 years of experience in the natural gas industry, our team focuses on natural gas prices and in helping businesses improve their internal processes for the purchase of natural gas.