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Natural Gas Weekly Update

for week ending September 2, 2015  |  Release Date:  September 3, 2015  |  Next Release: September 10, 2015

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JUMP TO: In The News | Overview | Prices/Demand/Supply | Storage

In the News:

Pipeline projects aim to increase Marcellus and Utica takeaway capacity

The Rockies Express Pipeline (REX) Zone 3 received FERC authorization on September 1 to enter full east-to-west operation, after completing all interconnect work. REX Zone 3 East-to-West is a multiphase project, and is one of 2015's most significant natural gas infrastructure projects supporting Appalachian Basin distribution. It has so far incrementally increased westward capacity on the line to 1.8 billion cubic feet per day (Bcf/d). The next planned phase of the project would increase the capacity to 2.6 Bcf/d, and is planned to be in-service by fourth-quarter 2016. This project is among several that are addressing takeaway from the Marcellus and Utica plays.

In 2014, more than 2.5 billion cubic feet per day (Bcf/d) of increased pipeline capacity entered service to access Appalachian natural gas. As production in these areas continues to grow, so does the amount of pipeline takeaway capacity, with 3.8 Bcf/d of new capacity online year-to-date in 2015, and more than 2.5 Bcf/d of additional capacity planned for the remainder of 2015. These 2015 projects are focused on moving gas east, west, and south of the Marcellus and Utica shale plays, and include:

  • Transcontinental Pipeline's Leidy Southeast Project entered partial service on March 1, nine months ahead of schedule and, though some work is required to reach full capacity, this project is set to move 525 million cubic feet per day (MMcf/d) east and south to receipt points along Transcontinental's mainline from Pennsylvania to Alabama.
  • Texas Eastern Transmission (Tetco) pipeline has two projects planned for 2015: the Uniontown-to-Gas City project and the Ohio Pipeline Energy Network (OPEN) project. The Uniontown-to-Gas City project, which entered partial service in August, will flow 425 MMcf/d of firm capacity gas sourced near its Uniontown Compressor Station in the Marcellus for delivery onto Panhandle Eastern Pipeline in Gas City, Indiana, with distribution into the Midcontinent when at full capacity later this month. Originating in Ohio, Tetco's OPEN project will source gas from Utica and the wet parts of the Marcellus in southwestern Pennsylvania. It will transport this gas to the Midwest, Southeast, and the Gulf Coast by adding up to 550 MMcf/d of additional capacity on the Tetco system. Tetco OPEN will use the existing Tetco mainline, with reverse flow modifications, in Ohio, Kentucky, Mississippi, and Louisiana, and is scheduled to come online in December 2015.
  • The East Side Expansion, from Columbia Pipeline Group (TCO), will transport Marcellus gas to markets along the East Coast and Mid-Atlantic from New Jersey south to northeastern Virginia, with a targeted in-service date of October 2015 and a rated capacity of 312 MMcf/d.
  • Utica Ohio River Project, scheduled to be in-service later in 2015, is a joint venture project between Regency Energy Partners and Traverse Midstream, and will transport gas from the Utica play. This project will deliver 2.1 Bcf/d of gas to REX and the Tetco mainline on its southern end.

Although these projects will deliver gas east, south, and west, there are three projects scheduled for 2016 that will increase the capacity to New England by about 1 Bcf/d. These are the Algonquin Incremental Market (AIM) project, the Wright Interconnect Project, and Constitution Pipeline. With 342 MMcf/d of capacity, AIM is scheduled to come online in November 2016 and will move Marcellus gas with increased capacity from Ramapo, New York, through lower New England to Boston. The Wright Interconnect Project, an expansion of Iroquois's existing compression and metering facilities in Wright, New York, will support the Constitution Pipeline, a new pipeline from Marcellus providing 650 MMcf/d of new capacity to Iroquois and the Tennessee Gas Pipeline in upstate NY (Schoharie County) to supply New York and New England markets. Both of these projects have an anticipated start date of July 2016.

Overview:

(For the Week Ending Wednesday, August 2, 2015)

  • Natural gas spot prices were relatively flat at most market locations over the report week (Wednesday, August 26 through September 2). The Henry Hub spot price began the week at $2.72 per million British thermal units (MMBtu) last Wednesday and ended the week at $2.71/MMBtu.
  • At the New York Mercantile Exchange (Nymex), the September near-month contract began the week at $2.693/MMBtu last Wednesday and settled at $2.638 on Thursday. The October contract began the week at $2.703/MMBtu last Wednesday and settled down a nickel, at $2.648 yesterday.
  • Working natural gas in storage increased to 3,193 Bcf as of Friday, August 28. A net injection into storage of 94 Bcf for the week resulted in storage levels 18% above a year ago and 4% above the five-year average for this week.
  • The total oil and natural gas rig count fell by 8 from the previous week, with 877 units in service for the week ending Friday, August 28, according to data from Baker Hughes Incorporated. The oil rig count increased by 1 to 675 units, while the natural gas rig count decreased by 9 to 202 units.
  • The natural gas plant liquids composite price at Mont Belvieu, Texas, decreased by 27¢ per MMBtu to $4.19/MMBtu, down 6.0 % for the week ending August 28. All natural gas liquids spot prices fell this week, with ethane down 3.7%, propane down 5.3%, butane down 4.9%, isobutane down 4.8%, and natural gasoline down 9.7%. WTI crude oil prices dropped below $40/barrel, likely applying downward pressure on natural gas liquids prices.

more summary data

Prices/Demand/Supply:

Prices outside the Northeast are fairly flat. The hot summer weather continues for most of the nation. Temperatures increased throughout the report week in the central and eastern parts of the country, although on the West Coast, temperatures moderated. The Henry Hub spot price began the report week at $2.72/MMBtu last Wednesday and settled yesterday down 1¢ at $2.71. Prices at other market locations were mostly flat. The Chicago Citygate price fell by 2¢, closing at $2.79/MMBtu yesterday. Cheyenne, in southeast Wyoming, rose by 1¢ to $2.53/MMBtu. Prices at PG&E Citygate, serving Northern California, fell by 2¢ over the report week, closing at $3.10/MMBtu yesterday. Other West Coast price points saw larger declines, but none exceeding a dime.

Northeast prices continue to rise on increased power demand. After falling late last week, prices in the Northeast increased early this week as many states in the region saw temperatures averaging between 70° and 80° Fahrenheit. Additionally, TGP Station 245 in central New York is undergoing maintenance, temporarily losing more than 0.2 Bcf/d of capacity. Gas prices at the Algonquin Citygate, serving Boston, started the report week at $3.06/MMBtu, peaked at $3.75 on Monday, and ended the week up at $3.14/MMBtu yesterday. At Transcontinental Pipeline's Zone 6, serving New York City, the spot price started the report week at $2.66/MMBtu, dipped on Friday, and ended the week up at $2.84 yesterday.

Marcellus prices rise slightly, though remain low. Continuing last week's trend, prices in the Marcellus rose at several trading points this report week. On the Transco Leidy Line, prices started the week at $1.01/MMBtu last Wednesday and rose to $1.21 yesterday. At Dominion South, which serves customers in portions of Pennsylvania, Ohio, Maryland, West Virginia, and Virginia, prices rose from $1.18/MMBtu last Wednesday to $1.32 yesterday. At Tennessee's Zone 4 Marcellus location, prices were flat over the period, beginning at $1.02/MMBtu last Wednesday, dipping to 81¢ on Friday, and ending the week at $1.04.

The final components of the REX Zone 3 East-to-West project, which were cleared by FERC, completed construction work early this week. The final stage of the project places two interconnects and a compressor station in Illinois in service. There were only modest increases in flows on September 1 on REX with completion of this project, according to data from Bentek.

Nymex prices decline. At the New York Mercantile Exchange (Nymex), the September near-month contract began the report week at $2.693/MMBtu last Wednesday and settled at $2.638 on Thursday, when it expired as the near-month contract. The October contract began as prompt-month on Friday at $2.715/MMBtu and settled down a nickel, at $2.648 yesterday. The 12-month strip, averaging the October 2015 through September 2016 Nymex contracts, averaged $2.884/MMBtu for the report period. The Nymex futures contracts for January through March of 2016 are all very close to $3.00/MMBtu, indicating market expectations of a modest winter price premium.

Supply remains flat. Dry natural gas production was similar to the past report week, averaging 72.3 Bcf/d, which is 3.7% higher than last year at this time, according to Bentek Energy data. Imports of natural gas from Canada fell by 1%, while LNG sendout increased by 5%, averaging 0.3 Bcf/d. LNG sendout was dominated by volumes at the Everett terminal in Boston, which saw temperatures increase markedly early this week. Overall supply was unchanged from the previous report period.

Consumption increases slightly. U.S. consumption increased 0.9% for the week, led by a 3% increase in natural gas for power generation (power burn). Power burn increased in all regions but the Southeast. The Midwest largely drove the increase, as power burn in the region rose by 0.7 Bcf/d for the report period, 81% higher than last week. Power burn in the Midcontinent also contributed, rising 0.3 Bcf/d, or 30%, over last week. Industrial consumption, residential/commercial consumption, and exports to Mexico all fell slightly for the week.

more price data

Storage

With reclassification, net storage injection is higher than both the five-year average and last year's builds. The net injection reported for the week ending August 28 was 94 Bcf, up from 69 Bcf the previous week. This compares with the five-year average increase of 60 Bcf for the week and last year's increase of 79 Bcf. However, the 94 Bcf net injection for the report week includes 8 Bcf in the East region that was reclassified from base gas to working gas. Therefore, the implied flow for the week, reflecting the actual amount that flowed into storage, is an increase of 86 Bcf to working gas stocks. Currently, EIA will report an implied flow as different from the net change in working gas when inventory adjustments or reclassifications exceed 7 Bcf, but that threshold will be lowered to 4 Bcf later this year when other changes, including new regions, are introduced to the Weekly Natural Gas Storage Report. Working gas inventories for the storage week totaled 3,193 Bcf, 495 Bcf (18%) higher than last year at this time and 122 Bcf (4%) higher than the five-year (2010-14) average.

Storage injections are higher than market expectations. Market expectations, on average, called for a build of 90 Bcf. When the EIA storage report was released at 10:30 a.m. on September 3, the price for the October natural gas futures contract rose a few cents to around $2.68/MMBtu in Nymex futures trading. In the next hour, the price oscillated between $2.65 and $2.68/MMBtu.

From the week ending April 3 (the beginning of the injection season) through the week ending August 28, net storage injections totaled 1,732 Bcf, or 133 Bcf less than the 1,865 Bcf injected during the same 22 weeks in 2014. During these weeks for the years 2010-14, net injections into storage averaged 1,420 Bcf. The estimated average unit value of the natural gas storage holders put into storage from April 3 to August 28 this year is $2.77/MMBtu, 37% lower than the average value of $4.36/MMBtu for the same 22 weeks last year. The highest winter-month Nymex price (for the January 2016 contract) in trading for the week ending August 28 averaged $3.03/MMBtu. This price is 35¢/MMBtu more than the October Nymex contract price. A year ago, the difference was 37¢/MMBtu.

Temperatures during the storage report week were cooler than normal. Temperatures in the Lower 48 states averaged 72° for the storage report week, 1° cooler than the 30-year normal temperature and 3° cooler than the average temperature during the same week last year. There were 58 population-weighted cooling degree days (CDD) this report week, 11 CDD fewer than the five-year average and 15 CDD fewer than during this week last year.

more storage data

See also:

Appalachian Basin pipeline expansion projects for 2015-16
    (Click to enlarge)


Natural gas spot prices
Spot Prices ($/MMBtu)
Thu,
27-Aug
Fri,
28-Aug
Mon,
31-Aug
Tue,
1-Sep
Wed,
2-Sep
Henry Hub
2.68
2.66
2.68
2.74
2.71
New York
2.35
1.92
2.78
2.88
2.84
Chicago
2.78
2.77
2.77
2.83
2.79
Cal. Comp. Avg,*
2.82
2.79
2.80
2.86
2.81
Futures ($/MMBtu)
September Contract
2.638
Expired
Expired
Expired
Expired
October Contract
2.664
2.715
2.689
2.702
2.648
November Contract
2.745
2.792
2.761
2.771
2.720
*Avg. of NGI's reported prices for: Malin, PG&E citygate, and Southern California Border Avg.
Source: NGI's Daily Gas Price Index
Natural gas futures prices
Natural gas liquids spot prices


U.S. natural gas supply - Gas Week: (8/26/15 - 9/2/15)
Percent change for week compared with:
 
last year
last week
Gross production
3.77%
-0.00%
Dry production
3.74%
-0.00%
Canadian imports
2.01%
-0.95%
      West (net)
11.01%
-2.59%
      Midwest (net)
-12.23%
-0.86%
      Northeast (net)
-218.10%
162.25%
LNG imports
146.09%
5.47%
Total supply
3.87%
-0.05%
Source: BENTEK Energy LLC
U.S. consumption - Gas Week: (8/26/15 - 9/2/15)
Percent change for week compared with:
 
last year
last week
U.S. consumption
3.8%
1.0%
Power
9.4%
3.0%
Industrial
-2.0%
-0.4%
Residential/commercial
-0.1%
-1.7%
Total demand
4.6%
0.9%
Source: BENTEK Energy LLC
Natural gas supply


Weekly natural gas rig count and average Henry Hub
Rigs
Fri, August 28, 2015
Change from
 
last week
last year
Oil rigs
675
0.15%
-57.14%
Natural gas rigs
202
-4.27%
-40.24%
Miscellaneous
0
0.00%
-100.00%
Rig numbers by type
Fri, August 28, 2015
Change from
 
last week
last year
Vertical
125
-3.85%
-66.58%
Horizontal
672
-0.74%
-49.47%
Directional
80
2.56%
-61.90%
Source: Baker Hughes Inc.


Working gas in underground storage
Stocks
billion cubic feet (bcf)
Region
2015-08-28
2015-08-21
change
East
1,581 C
1,510
71
West
482
479
3
Producing
1,130
1,110
20
Total
3,193 C
3,099
94
C = Reclassification
Source: U.S. Energy Information Administration
Working gas in underground storage
Historical comparisons
Year ago
(8/28/14)
5-year average
(2010-2014)
Region
Stocks (Bcf)
% change
Stocks (Bcf)
% change
East
1,454
8.7
1,619
-2.3
West
425
13.4
464
3.9
Producing
820
37.8
987
14.5
Total
2,698
18.3
3,071
4.0
Source: U.S. Energy Information Administration


Temperature -- heating & cooling degree days (week ending Aug 27)
 
HDD deviation from:
 
CDD deviation from:
Region
HDD Current
normal
last year
CDD Current
normal
last year
New England
1
-5
-4
48
23
25
Middle Atlantic
4
0
3
37
-1
-6
E N Central
21
14
21
8
-29
-61
W N Central
20
11
17
21
-29
-60
South Atlantic
0
-1
0
88
4
-4
E S Central
2
2
2
61
-18
-47
W S Central
0
0
0
112
-2
-29
Mountain
3
-9
-5
76
12
27
Pacific
0
-5
0
65
23
21
United States
8
3
6
58
-2
-15
Note: HDD = heating degree-day; CDD = cooling degree-day

Source: National Oceanic and Atmospheric Administration

Average temperature (°F)

7-Day Mean ending Aug 27, 2015

Mean Temperature (F) 7-Day Mean ending Aug 27, 2015

Source: NOAA/National Weather Service

Deviation between average and normal (°F)

7-Day Mean ending Aug 27, 2015

Mean Temperature Anomaly (F) 7-Day Mean ending Aug 27, 2015

Source: NOAA/National Weather Service