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Natural Gas Weekly Update

for week ending April 23, 2014  |  Release Date:  April 24, 2014  |  Next Release: May 1, 2014

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

In the News:

Marcellus gas production backlog spurs pipes heading south as well as north

Increasing natural gas production in the Appalachian Basin's Marcellus Shale play continues to outpace the growth in the region's pipeline takeaway capacity. This has led to supply backups in the Marcellus region, with new production often unable to flow to areas where gas is in high demand, placing downward pressure on prices in the region. It has also contributed to a number of natural gas wells in Marcellus remaining backlogged, with a February 28 report from Barclay's estimating that more that 1,300 wells there are drilled but not completed. Natural gas prices at Leidy Hub in central Pennsylvania have continued to trade significantly below the Henry Hub national benchmark spot price. This winter, the Leidy spot price averaged $3.55 per million British thermal units (MMBtu), $1.08/MMBtu below Henry Hub, and lower than the average spot price at any other major U.S. natural gas hub.

Several proposed and recently completed projects will provide additional pipeline infrastructure to relieve some of the Marcellus supply backup. Projects that have recently come online, such as Transcontinental Pipeline Company's (Transco) Northeast Supply Link, have expanded the capacity of pipelines to move gas north, into the New York and New England demand centers. Recently, there have also been several proposed projects to move natural gas from the Marcellus region south, reversing flows on pipelines that historically sent natural gas from the Gulf Coast to consumers in the Northeast.

Transco announced on Thursday, April 17, that natural gas shippers entered into firm delivery contracts for the full 0.44 billion cubic feet per day (Bcf/d) of planned expansions under its Dalton Expansion Project. The Dalton Expansion Project allows for the flow of natural gas south from New Jersey to Georgia on the Transco mainline. Transco currently has a peak design capacity of 9.80 Bcf/d, and flowed up to 2.80 Bcf/d of Marcellus gas to customers in the Northeast this winter, according to data from Bentek Energy, LLC. Transco has submitted a request with the Federal Energy Regulatory Commission (FERC) for the Dalton project, and currently plans to begin construction in April 2016 and begin service in May 2017.

There are two principal pipelines on the Transco mainline's right-of-way (segments A and B), and up to five, depending on how many of the three additional pipelines (segments C, D, and E) operate on each section. All of these segments currently can only move gas north from the Gulf of Mexico. The Dalton Expansion Project would involve modifications that would allow Transco to flow gas south on at least one of these lines from its Zone 6 Market Pool (Station 210) in New Jersey. At Station 210, Transco receives Marcellus Shale gas transported east from Leidy Hub in Pennsylvania. Modified portions of the mainline in New Jersey, Maryland, Virginia, and North Carolina on portions of Transco enable this gas to flow down to Georgia, where a new lateral pipeline, compressor station, and three new metering facilities could transport it to Atlanta's local distribution company (Atlanta Gas and Light) and Oglethorpe Power's Thomas A. Smith power plant in Dalton, Georgia.

Before completing the Dalton project, Transco plans to complete the Leidy Southeast Project. Like Dalton, Leidy Southeast would enable Transco to move gas south toward the Gulf on sections of its mainline that currently can only move gas from the Gulf to the north. This project, targeted to be in service by December 2015, would increase the Leidy Line's current 1.66 Bcf/d capacity to move Marcellus production out of central Pennsylvania by an additional 0.51 Bcf/d. The project would involve compressor station expansions beginning this fall, and the addition of new looping, or parallel, pipelines and modification of existing pipelines beginning in the spring of 2015. Pipeline operators have also received firm commitments on a number of other projects to move at least 4.68 Bcf/d of Marcellus production south toward the Gulf Coast, including:

Overview:

(For the Week Ending Wednesday, April 23, 2014)

  • Natural gas spot prices increased at almost all market locations outside of the Northeast and the Midwest. The Henry Hub spot price increased by $0.17/MMBtu from $4.62/MMBtu last Wednesday, April 16, to $4.79/MMBtu yesterday.
  • At the New York Mercantile Exchange (Nymex), the price of the near-month futures contract rose from $4.530/MMBtu last Wednesday to $4.730/MMBtu yesterday.
  • Working natural gas in storage rose to 899 billion cubic feet (Bcf) as of Friday, April 18, according to the U.S. Energy Information Administration (EIA) Weekly Natural Gas Storage Report (WNGSR). A net storage injection of 49 Bcf for the week resulted in storage levels 48.0% below year-ago levels and 52.9% below the 5-year average.
  • Active oil and natural gas drilling rigs totaled 1,831 as of April 17, unchanged from the previous week, according to data from Baker Hughes Inc. The natural gas rig count increased by 6 rigs to 316, while the number of oil-directed rigs decreased by 7 from 1,517 to 1,510.
  • The weekly average natural gas plant liquids composite price increased for the fourth week in a row. The composite price rose this week (covering April 14 through April 18) by 1.7%, and is now at $10.40/MMBtu. All five of the components of the composite price increased this week. Natural gasoline increased by 2.8%; ethane, 0.4%; propane, 1.5%; butane, 1.6%; and isobutane, 1.8%.

more summary data

Prices/Demand/Supply:

Natural gas spot prices outside the Midwest and Northeast rise. Spot prices outside the Midwest and the Northeast increased by $0.15/MMBtu on average, with the largest gains occurring in Texas and Louisiana. The average spot prices in Texas and Louisiana increased by $0.18/MMBtu and $0.17/MMBtu from last Wednesday to $4.69/MMBtu and $4.71/MMBtu yesterday, respectively. The Henry Hub spot price increased by $0.17/MMBtu from $4.62/MMBtu last Wednesday to $4.79/MMBtu yesterday.

Prices in the Midwest and the Northeast fell by $0.11/MMBtu on average from last Wednesday to $4.58/MMBtu yesterday, with significant decreases occurring in the Northeast. The largest decline occurred at Tennessee Gas Pipeline's Zone 5, located at the New York and Massachusetts borders. Spot prices at that location fell by $0.97/MMBtu from last Wednesday to $4.72/MMBtu yesterday.

Since last Thursday, spot prices at Algonquin Citygate, which serves the Boston market, and Transco Zone 6 New York have been traded at a discount to the Henry Hub spot price. Historically, prices in these markets have traded at a premium to the Henry Hub. However, this week, as well as many days in the summer and fall of 2013, Algonquin Citygate and Transco Zone 6 New York were traded below the national benchmark. A discount at these market locations may be attributed to increasing supply from the Marcellus, which has displaced gas from the Gulf Coast.

Nymex increases. The price of the near-month (May 2014) contract at the Nymex increased from $4.530/MMBtu last Wednesday to $4.730/MMBtu yesterday. The price of the 12-month strip (the 12 contracts between May 2014 and April 2015) fell from $4.598/MMBtu last Wednesday to $4.763/MMBtu yesterday.

Spread between May and January futures contracts is 24 cents. The highest winter month Nymex price in trading yesterday was January, which settled at $4.956/MMBtu. This is 24 cents more than the Nymex May contract yesterday.

Increased natural gas imports from Canada offset a slight decline in U.S. gas production. According to Bentek data, overall supply increased 0.1% this week. This increase was due to a 5.4% increase in natural gas imports from Canada, particularly into western and northeastern United States, which increased 4.2% and 48.4% this week, respectively. Dry gas production decreased slightly, by 0.2% from the previous week. LNG sendout declined slightly, but has been a minimal part of the supply picture for some time now.

Consumption falls. U.S. natural gas consumption fell in all sectors except in the industrial sector, which increased by 0.1% from the previous week. Overall U.S. consumption decreased by 2.2 billion cubic feet per day (Bcf/d) or 3.5% from the previous week, with a combined decrease of 2.1 Bcf/d, in power, residential, and commercial consumption. Moderate temperatures across the United States likely contributed to the decreases of gas consumption. Power burn decreased in most regions except in the Midcontinent and the Pacific Northwest, where the temperatures were colder. Gas exports to Mexico fell 6.9% from the previous week.

more price data

Storage

Net storage injection exceeds average. The net injection reported for the week ending April 18 was 49 Bcf, 2 Bcf larger than the 5-year average net injection of 47 Bcf and 19 Bcf larger than last year's net injection of 30 Bcf. Working gas inventories totaled 899 Bcf, 831 Bcf (48.0%) less than last year at this time, 1,008 Bcf (52.9%) below the 5-year (2009-13) average, and 768 Bcf (46.1%) below the 5-year observed minimum.

Storage build is larger than market expectations. Market expectations called for a build of 42 Bcf. When the EIA storage report was released at 10:30 a.m., the price for the May natural gas futures contract rose 1 cent to $4.74/MMBtu on the Nymex. Prices fell 4 cents in the hour following the release.

Two regions post larger-than-average builds. The East, West, and Producing regions had net injections of 17 Bcf (10 Bcf smaller than its 5-year average injection of 27 Bcf), 10 Bcf (5 Bcf larger than its 5-year average injection of 5 Bcf), and 22 Bcf (6 Bcf larger than its 5-year average injection of 16 Bcf), respectively. Storage levels for all three regions remain below their year-ago and 5-year average levels, and their 5-year minimums.

Temperatures during the storage report week warmer than normal. Temperatures in the Lower 48 states averaged 53.6 degrees for the week, 0.9 degree warmer than the 30-year normal temperature and 0.4 degree warmer than during the same period last year.

more storage data

See also:



Natural gas spot prices
Spot Prices ($/MMBtu)
Thu,
17-Apr
Fri,
18-Apr
Mon,
21-Apr
Tue,
22-Apr
Wed,
23-Apr
Henry Hub
4.56
Closed
4.77
4.74
4.79
New York
3.61
Closed
4.26
4.35
4.40
Chicago
4.60
Closed
4.78
4.77
4.79
Cal. Comp. Avg,*
4.66
Closed
4.90
4.84
4.89
Futures ($/MMBtu)
May Contract
4.741
Closed
4.697
4.739
4.730
June Contract
4.754
Closed
4.715
4.758
4.747
*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: (4/16/14 - 4/23/14)
Percent change for week compared with:
 
last year
last week
Gross Production
3.96%
-0.19%
Dry Production
3.93%
-0.18%
Canadian Imports
-14.61%
5.48%
      West (Net)
-10.43%
4.18%
      MidWest (Net)
-29.23%
1.37%
      Northeast (Net)
270.02%
50.61%
LNG Imports
-43.51%
-6.83%
Total Supply
2.41%
0.14%
Source: BENTEK Energy LLC
U.S. Consumption - Gas Week: (4/16/14 - 4/23/14)
Percent change for week compared with:
 
last year
last week
U.S. Consumption
-6.0%
-3.1%
Power
-9.6%
-5.6%
Industrial
0.1%
0.1%
Residential/Commercial
-8.3%
-3.9%
Total Demand
-5.5%
-3.2%
Source: BENTEK Energy LLC
Natural gas supply


Weekly natural gas rig count and average Henry Hub
Rigs
Fri, April 18, 2014
Change from
 
last week
last year
Oil Rigs
1,510
-0.46%
10.14%
Natural Gas Rigs
316
1.94%
-16.62%
Miscellaneous
5
25.00%
-37.50%
Rig Numbers by Type
Fri, April 18, 2014
Change from
 
last week
last year
Vertical
391
0.00%
-15.18%
Horizontal
1,224
0.00%
11.58%
Directional
216
0.00%
8.00%
Source: Baker Hughes Inc.


Working Gas in Underground Storage
Stocks
billion cubic feet (bcf)
Region
2014-04-18
2014-04-11
change
East
328
311
17
West
178
168
10
Producing
393
371
22
Total
899
850
49
Source: U.S. Energy Information Administration
Working Gas in Underground Storage
Historical Comparisons
Year ago
(4/18/13)
5-year average
(2008-2012)
Region
Stocks (Bcf)
% change
Stocks (Bcf)
% change
East
683
-52.0
798
-58.9
West
334
-46.7
305
-41.6
Producing
712
-44.8
805
-51.2
Total
1,730
-48.0
1,907
-52.9
Source: U.S. Energy Information Administration


Temperature -- Heating & Cooling Degree Days (week ending Apr 17)
 
HDD deviation from:
 
CDD deviation from:
Region
HDD Current
normal
last year
CDD Current
normal
last year
New England
124
-12
-9
0
0
0
Middle Atlantic
97
-22
-3
0
0
0
E N Central
124
1
-2
0
0
0
W N Central
141
28
-28
0
-1
0
South Atlantic
52
-6
25
19
5
-15
E S Central
57
4
23
3
-2
-13
W S Central
46
22
16
15
-5
-17
Mountain
99
-15
-38
10
3
5
Pacific
33
-34
-41
0
-3
0
United States
86
-6
-8
6
0
-5
Note: HDD = heating degree-day; CDD = cooling degree-day

Source: National Oceanic and Atmospheric Administration

Average temperature (°F)

7-Day Mean ending Apr 17, 2014

Mean Temperature (F) 7-Day Mean ending Apr 17, 2014

Source: NOAA/National Weather Service

Deviation between average and normal (°F)

7-Day Mean ending Apr 17, 2014

Mean Temperature Anomaly (F) 7-Day Mean ending Apr 17, 2014

Source: NOAA/National Weather Service