David Bird from the Wall Street Journal wrote an interesting article on August 22 about the climb in natural gas prices even though the country had seen cooler weather and increased storage levels. The cause, he says, is due to the fact that natural gas prices sharply decreased early in the month, making them a more affordable option than coal to burn for energy. According to Bird, “analysts had expected a larger inventory rise after cool temperatures across the U.S. last week prompted many homes and businesses to idle air conditioners, but the displacement of coal with natural gas more than offset the reduction in electricity demand.”

I set about to build some supporting graphs using the ZEMA Suite. Bird quotes a number of different sources to describe the impact on natural gas prices, such as NYMEX natural gas prompt contract prices, EIA natural gas stocks and temperature across the US.

temp-v-gas-price

Figure 1: NYMEX Future Settlements (Ticker NG, Prompt Contract) for 2013 compared against average US temperature from Accuweather.

In Figure 1, the Temperature vs. Gas Price graph, we see that the average temperature across the United States was indeed cooler since late July and the NYMEX NG prompt price continued to rise.

ng-storage

Figure 2: Data is from EIA Natural Gas Storage report which is delivered weekly and compares current versus 5 years and previous year values.

In Figure 2 above, we see that the weekly EIA natural gas storage values are above the five-year average, but well below last year’s levels. These graphs were all produced in the ZEMA Suite and helped to very quickly paint a picture of Bird’s analysis.