Natural Gas Weekly Fundamental Analysis December 10 – 14, 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 ended the week at 3.542 as trader dumped the commodity as fast as they could after pumping up prices just a week ago to a record high at 3.9999. Natural gas tumbled 3.06% on Friday alone. The commodity traded at a weekly high of 3.745 ahead of warmer temperatures in the US and the longer term forecast for warmer temperatures through December, reduced residential demand.

Natural gas prices registered overall decreases for the report week at many of the country’s trading locations. The Henry Hub price declined steadily throughout most of the reporting period, closing yesterday at $3.41 per million British thermal units, down 29 cents for the week.

The natural gas futures market trended lower over most of the week. At the New York Mercantile Exchange the January 2012 natural gas contract lost 10.1 cents overall to close at $3.700 mid week

Working natural gas in storage declined last week to 3,804 billion cubic feet (Bcf) as of Friday, November 30, according to EIA’s Weekly Natural Gas Storage Report (WNGSR). An implied storage withdrawal of 73 Bcf for the week positioned storage volumes 33 Bcf below year-ago levels.

The natural gas rotary rig count, as reported by Baker Hughes Incorporated on November 30, decreased by 4 to 424 active units. Meanwhile, oil-directed rigs fell by 2 to 1,386 units.

The electric power industry in the southeastern United States has undergone substantial changes over the past three years. While coal-fired power plants continue to generate a majority of electricity in the region, their overall production has declined since 2010, and production from natural gas-fired plants has increased. This change can be primarily attributed to changes in the relative prices of natural gas and coal, which altered the dispatch order of power plants in the region.  

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 recent analysis and information in our weekly reports and we provide daily updates and outlooks.

Major Economic Events for the week actual v. forecast for Euro, GPB, the Franc, and USD

 Historical: From 2010 to Present

Highest: 6.106 on Jan 07, 2010

Average: 3.836 over this period

Lowest: 1.903 on April 19, 2012

 

WEEKLY

• Natural Gas Weekly Update
  Release Schedule: Thursday between 2:00 and 2:30 p.m. (Eastern Time)
• Weekly Natural Gas Storage Report
  Release Schedule: Thursday at 10:30 (Eastern Time) (schedule)

 

Economic Highlights of the coming week that affect the Euro, GBP, CHF and the USD