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Natural Gas Weekly Update

for week ending September 21, 2016  |  Release Date:  September 22, 2016  |  Next Release: September 29, 2016

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

In the News:

Price differences between Southern California natural gas trading hubs and the Henry Hub have been more volatile during summer 2016

Prices for natural gas in Southern California trading hubs during the summer months (June–August) have been considerably more volatile in 2016 compared with 2015. Although natural gas prices in the summer tend to move in response to high temperatures, the magnitude of price changes over this past summer likely resulted from restrictions on the use of the Southern California Gas Company's Aliso Canyon natural gas storage field. A well failure and leak were first detected at Aliso Canyon on October 23, 2015, and subsequent restrictions placed on Aliso Canyon brought working gas stock totals down to 15 billion cubic feet (Bcf), significantly lower than its 86 Bcf working gas capacity.

Price differences between Southern California natural gas trading hubs and the benchmark price of natural gas at the Henry Hub show how local conditions may be affecting the price of natural gas, apart from broader national price trends. The price differences between the Henry Hub and Southern California trading hubs have exhibited episodes of considerable variability during periods this summer with high temperatures and high electric generation cooling demand for natural gas. These price swings have been especially pronounced at the Southern California (SoCal) Citygate, which serves the greater Los Angeles area. At times during summer 2016, price differentials rivaled winter season peaks.

Aliso Canyon plays a strategic role in balancing the needs of electricity and natural gas customers in the Los Angeles basin, providing a swing source of natural gas for generating electricity. As a result of its strategic location, the restrictions on Aliso Canyon can directly affect the prices at the SoCal Citygate, because natural gas may not be withdrawn from storage to meet increased demand and to mitigate price swings. The reduced storage deliverability for the SoCalGas system is expected to remain a factor through the upcoming 2016–17 winter.

Daily information on Southern California energy markets is now available on the U.S. Energy Information Administration's new Southern California Daily Energy Report dashboard.

Overview:

(For the Week Ending Wednesday, September 21, 2016)

  • Natural gas spot prices rose at most locations this report week (Wednesday, September 14 to Wednesday, September 21). The Henry Hub spot price rose from $3.04 per million British thermal units (MMBtu) last Wednesday to $3.14/MMBtu yesterday.
  • At the New York Mercantile Exchange (Nymex), the October 2016 contract rose 17¢ from $2.889/MMBtu last Wednesday to $3.057/MMBtu yesterday.
  • Net injections to working natural gas storage totaled 52 Bcf for the week ending September 16. Working gas stocks are 3,551 Bcf, which is 4% more than the year-ago level and 8% more than the five-year (2011–15) average for the week.
  • The natural gas plant liquids composite price at Mont Belvieu, Texas, rose by 19¢, closing at $5.02/MMBtu for the week ending September 16. The price of natural gasoline fell by 1%. The price of ethane, propane, butane, and isobutane rose by 8%, 3%, 2%, and 9%, respectively.
  • According to Baker Hughes, for the week ending Friday, September 16, the natural gas rig count decreased by 3 to 89. The number of oil-directed rigs rose by 2 to 416. The number of miscellaneous rigs went down by one during the week. The total rig count dropped by 2, and now stands at 506.

more summary data

Prices/Supply/Demand:

Prices increase outside Marcellus. This report week (Wednesday, September 14 to Wednesday, September 21), the Henry Hub spot price rose 10¢ from $3.04/MMBtu last Wednesday to $3.14/MMBtu yesterday. At the Chicago Citygate, prices increased 17¢ from $2.92/MMBtu last Wednesday to $3.09/MMBtu yesterday. Prices at PG&E Citygate in Northern California gained 14¢, rising from $3.42/MMBtu last Wednesday to $3.56/MMBtu yesterday. The price at SoCal Citygate rose 14¢ from $2.95/MMBtu last Wednesday to $3.09/MMBtu yesterday.

Boston sees continued price swings. At the Algonquin Citygate, which serves Boston-area consumers, prices went up 18¢ from $3.06/MMBtu last Wednesday to $3.24/MMBtu yesterday. However, prices averaged a low of $2.37/MMBtu on Friday, heading into the weekend. Similar price volatility has been occurring for the past few weeks, and tends to coincide with swings in regional power burn. At the Transcontinental Pipeline Zone 6 trading point for New York, prices increased 15¢ from $1.35/MMBtu last Wednesday to $1.50/MMBtu yesterday after dipping to 96¢ on Friday.

Tennessee Zone 4 Marcellus spot prices decreased 5¢ from $1.21/MMBtu last Wednesday to $1.16/MMBtu yesterday. Prices at Dominion South in northwest Pennsylvania remained steady at $1.20/MMBtu.

October contract closes above $3. At the Nymex, the price of the October 2016 contract increased 17¢, from $2.889/MMBtu last Wednesday to $3.057/MMBtu yesterday, the highest front-month contract price since January 2015. The price of the 12-month strip averaging October 2016 through September 2017 futures contracts climbed 11¢ to $3.207/MMBtu.

Supply falls. According to data from PointLogic, the average total supply of natural gas fell by 1% compared with the previous report week. Dry natural gas production decreased by 1% from the last report week. Average net imports from Canada decreased by 2%.

U.S. consumption remains steady. Total U.S. consumption of natural gas was unchanged from last week, averaging 59.4 Bcf/d, according to data from PointLogic. Power burn declined by 3% week over week, and industrial sector consumption stayed constant, averaging 19.4 Bcf/d. Natural gas exports to Mexico decreased 5%.

U.S. liquefied natural gas (LNG) exports. The natural gas pipeline flows to the Sabine Pass liquefaction terminal averaged 0.2 Bcf/d this report week, 82% lower than last week. The pipeline deliveries declined last week as the terminal prepared for planned maintenance. The maintenance was scheduled to improve performance of the wet/dry flare systems shared by Trains 1 and 2, and to carry out maintenance of other facilities. During maintenance, which is expected to last approximately four weeks, both liquefaction trains will be completely shut down. However, the terminal may still receive nominal natural gas deliveries—10 million cubic feet per day (MMcf/d) to 100 MMcf/d—as part of the commissioning of Train 3. The terminal had no LNG exports last week since the last LNG-carrying vessel departed the facility on September 11.

more price data

Storage:

Injections to storage continue at slower-than-normal rate. Net injections into storage totaled 52 Bcf, compared with the five-year (2011–15) average net injection of 83 Bcf and last year's net injections of 96 Bcf during the same week. Working gas stocks total 3,551 Bcf, 268 Bcf above the five-year average and 140 Bcf above last year at this time. When the refill season began on April 1, working gas stocks were 874 Bcf above the five-year average.

South Central region posts net withdrawals this week. Net withdrawals totaled 2 Bcf in the South Central region, with salt dome facilities withdrawing 7 Bcf of the total, and nonsalt facilities injecting 5 Bcf. For the 9th time in the past 10 weeks, working gas stocks in the South Central region declined. Withdrawals from storage in the region are on a record-setting pace this summer, with net withdrawals from storage occurring more frequently and at larger volumes than ever before. So far in the refill season (April 1–October 31), net withdrawals from storage in the region's salt dome facilities have totaled 45 Bcf, while net injections at the nonsalt facilities have totaled 128 Bcf. These levels compare with the five-year average net injection of 81 Bcf in salt dome facilities and 292 Bcf in nonsalt dome facilities. Working gas stocks in the South Central region remain 13% above the five-year average for this time of year.

Net injections are within range of market expectations, early trading moves prices ahead of release. Estimates of net injections into storage ranged from 44 Bcf to 71 Bcf, with a median of 52 Bcf. One second prior to the release of EIA's Weekly Natural Gas Storage Report (WNGSR), increased trading resulted in a 3¢/MMBtu decline in the price of the Nymex contract for October delivery at the Henry Hub to $3.04/MMBtu. At the release of the WNGSR, the price of the October futures contract declined another 2¢/MMBtu during relatively light trading. The price recovered somewhat in the following minutes, stabilizing at around $3.03/MMBtu.

Spread to the January futures price declines over the week. During the most recent storage week, the average natural gas spot price at the Henry Hub was $2.99/MMBtu, while the Nymex futures price of natural gas for delivery in January 2017 averaged $3.29/MMBtu, a difference of 30¢. The premium was 33¢ a year ago.

Temperatures fall relative to last week, remain higher than normal. Temperatures in the Lower 48 states averaged 73°F, 4°F higher than the normal and 4°F higher than last year at this time. Cooling degree-days in the Lower 48 states totaled 60, compared with 42 last year and compared to a normal of 40.

more storage data

See also:

Day-ahead price differential between Southern California citygate and the Henry Hub


Natural gas spot prices
Spot Prices ($/MMBtu)
Thu,
15-Sep
Fri,
16-Sep
Mon,
19-Sep
Tue,
20-Sep
Wed,
21-Sep
Henry Hub
2.95
2.94
2.97
3.08
3.14
New York
1.22
0.96
1.53
1.80
1.50
Chicago
2.84
2.88
2.98
3.09
3.09
Cal. Comp. Avg.*
2.97
2.91
3.04
3.13
3.18
Futures ($/MMBtu)
October contract
2.927
2.948
2.934
3.047
3.057
November contract
3.002
3.021
3.005
3.109
3.132
*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: (9/15/16 - 9/21/16)
Average daily values (Bcf/d):
this week
last week
last year
Marketed production
79.7
80.3
81.7
Dry production
71.7
72.2
73.4
Net Canada imports
5.8
5.9
5.1
LNG pipeline deliveries
0.2
0.2
0.2
Total supply
77.7
78.3
78.7

Source: OPIS PointLogic Energy, an IHS Company
Note: LNG pipeline deliveries represent gas sendout from LNG import terminals.

U.S. natural gas consumption - Gas Week: (9/15/16 - 9/21/16)
Average daily values (Bcf/d):
this week
last week
last year
U.S. consumption
59.4
59.7
56.7
    Power
31.7
32.6
27.7
    Industrial
19.4
19.4
19.7
    Residential/commercial
8.3
7.7
9.3
Mexico exports
3.4
3.6
3.3
Pipeline fuel use/losses
6.6
6.6
6.3
LNG pipeline receipts
0.2
1.2
0.0
Total demand
69.7
71.1
66.3

Source: OPIS PointLogic Energy, an IHS Company
Note: LNG pipeline receipts represent pipeline deliveries to LNG export terminals.

Natural gas supply


Weekly natural gas rig count and average Henry Hub
Rigs
Fri, September 16, 2016
Change from
 
last week
last year
Oil rigs
416
0.5%
-35.4%
Natural gas rigs
89
-3.3%
-55.1%
Miscellaneous
1
-50.0%
0.0%
Rig numbers by type
Fri, September 16, 2016
Change from
 
last week
last year
Vertical
64
0.0%
-46.2%
Horizontal
394
-0.5%
-38.4%
Directional
48
0.0%
-42.2%
Source: Baker Hughes Inc.


Working gas in underground storage
Stocks
billion cubic feet (Bcf)
Region
2016-09-16
2016-09-09
change
East
851
832
19
Midwest
985
954
31
Mountain
230
227
3
Pacific
318
317
1
South Central
1,167
1,169
-2
Total
3,551
3,499
52
Source: U.S. Energy Information Administration
Working gas in underground storage
Historical comparisons
Year ago
(9/16/15)
5-year average
(2011-2015)
Region
Stocks (Bcf)
% change
Stocks (Bcf)
% change
East
805
5.7
812
4.8
Midwest
908
8.5
917
7.4
Mountain
196
17.3
189
21.7
Pacific
351
-9.4
334
-4.8
South Central
1,151
1.4
1,031
13.2
Total
3,411
4.1
3,283
8.2
Source: U.S. Energy Information Administration


Temperature -- heating & cooling degree days (week ending Sep 15)
 
HDD deviation from:
 
CDD deviation from:
Region
HDD Current
normal
last year
CDD Current
normal
last year
New England
2
-21
-6
47
41
31
Middle Atlantic
2
-14
-6
51
35
33
E N Central
7
-14
-21
30
14
21
W N Central
18
-9
-5
30
7
2
South Atlantic
0
-3
-7
102
36
40
E S Central
0
-3
-13
91
37
52
W S Central
0
-2
-1
106
18
23
Mountain
23
-8
15
47
4
-8
Pacific
5
-5
0
24
-9
-31
United States
6
-9
-7
60
20
18
Note: HDD = heating degree-day; CDD = cooling degree-day

Source: National Oceanic and Atmospheric Administration

Average temperature (°F)

7-Day Mean ending Sep 15, 2016

Mean Temperature (F) 7-Day Mean ending Sep 15, 2016

Source: NOAA/National Weather Service

Deviation between average and normal (°F)

7-Day Mean ending Sep 15, 2016

Mean Temperature Anomaly (F) 7-Day Mean ending Sep 15, 2016

Source: NOAA/National Weather Service