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Natural Gas Weekly Update

for week ending July 20, 2016  |  Release Date:  July 21, 2016  |  Next Release: July 28, 2016

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

In the News:

With REX maintenance, Appalachian production declines this week

Maintenance on the Rockies Express Pipeline (REX) that began earlier this week has led to production declines in the Appalachian and Northeast regions, according to PointLogic Energy. Pipeline maintenance began on Tuesday and is expected to last through Monday, July 25. The maintenance is part of the REX East-to-West Capacity Enhancement Project, which includes the installation of new compressor stations and additional power at existing stations. At maximum, an estimated 1.8 billion cubic feet per day (Bcf/d) of flows between Clarington, Ohio, and Shelbyville, Indiana will be curtailed.

Northeast and Appalachian natural gas production dropped 1.0 Bcf/d (4%) on Tuesday, the day the maintenance began, and then another 0.3 Bcf/d on Wednesday. According to PointLogic, most of the declines came from the Utica area in Ohio. Production in the region is likely to remain at relatively low levels until the maintenance is complete.

At 1,700 miles, REX is one of the longest pipelines in the United States. In November 2009, it began east-bound service to supply up to 1.9 Bcf/d of natural gas from the Rockies to midwestern and northeastern markets in order to meet demand. As Marcellus and Utica production increased beginning around 2010, the demand for REX-supplied gas decreased. In response to changing market conditions, Tallgrass Development, the operator of REX, began construction that would allow for physical flow reversal on REX's easternmost zone, Zone 3, which stretches from Clarington, Ohio, to Mexico, Missouri.

Overview:

(For the Week Ending Wednesday, July 20, 2016)

  • Natural gas spot prices decreased at most locations this report week (Wednesday, July 13, to Wednesday, July 20). The Henry Hub spot price fell 9¢ from $2.81 per million British thermal units (MMBtu) last Wednesday to $2.72/MMBtu yesterday.
  • At the New York Mercantile Exchange (Nymex), the near-month (August 2016) contract fell by about 8¢ over the report period, ending yesterday at $2.658/MMBtu.
  • Net injections to working gas totaled 34 Bcf for the week ending July 15. Working gas stocks are 3,277 Bcf, which is 17% greater than the year-ago level and 21% greater than the five-year (2011-15) average for this week.
  • According to Baker Hughes, for the week ending Friday, July 15, the natural gas rig count increased by 1 to 89. Oil-directed rigs increased by 6 to 357. The total rig count increased by 7 and now stands at 447.
  • The natural gas plant liquids composite price at Mont Belvieu, Texas, fell by 3¢, closing at $4.96/MMBtu for the week ending July 15. The prices of natural gas liquids products were mixed this week: natural gasoline and isobutane rose 1% and 2%, respectively; butane was flat; and ethane and propane fell 3% and 1%, respectively.

more summary data

Prices/Supply/Demand:

Prices fall at most locations. Despite increased demand, flat supply, and expectations of continued hot weather, natural gas spot prices decreased at most locations this report week (Wednesday, July 13, to Wednesday, July 20). The Henry Hub spot price fell 9¢ from $2.81/MMBtu last Wednesday to $2.72/MMBtu yesterday. At the Chicago Citygate, prices fell 4¢ from $2.76/MMBtu last Wednesday to $2.72/MMBtu yesterday.

By contrast, price points in California were mostly up week-on-week. The price at SoCal Citygate rose 16¢ to $3.02/MMBtu yesterday. Southern California Gas Co. has been testing the wells at its Aliso Canyon storage field in order to restore them to operation as soon as possible. California's Division of Oil, Gas and Geothermal Resources established a protocol of eight tests that must be performed on each well at Aliso before they can return to storage service.

Northeast prices fall. Temperatures in the Northeast started the report week well above seasonal norms but trended down through yesterday. At the Algonquin Citygate, which serves Boston-area consumers, prices fell 34¢ over the report week to $2.74/MMBtu yesterday. At the Transcontinental Pipeline's Zone 6 trading point for New York, prices fell 8¢ to $2.21/MMBtu yesterday.

Marcellus prices rise slightly. In the Marcellus region, prices generally increased despite outages on the Rockies Express Pipeline Zone 3, which transports gas west through Ohio. The Tennessee Zone 4 Marcellus price rose 4¢ from $1.30/MMBtu last Wednesday to $1.34/MMBtu yesterday. The price at Dominion South in northwest Pennsylvania remained flat at $1.40/MMBtu.

Nymex prices fall. At the Nymex, the near-month contract fell by about 8¢, from $2.737/MMBtu last Wednesday to $2.658/MMBtu yesterday. The price of the 12-month strip (the average of the 12 contracts between August 2016 and July 2017) also fell by 8¢, from $3.040/MMBtu last Wednesday to $2.956/MMBtu yesterday.

Supply is flat week–over–week. According to data from PointLogic, total supply of natural gas remained the same as last week, averaging 80.0 Bcf/d. Dry gas production fell by 1% over the report week. Average net imports from Canada rose, increasing 13% from last week. Natural gas pipeline deliveries to liquefied natural gas (LNG) export terminals fell from last week but remain a small contributor to overall supply.

Power burn drives consumption increases again this week. During the report week, total U.S. consumption of natural gas rose by 2%, according to data from PointLogic, driven by gas consumption in the electric power sector that rose by 4% week–over–week. Industrial sector consumption remained the same as last week, averaging 19.5 Bcf/d. In the residential and commercial sectors, consumption fell by 3%. Natural gas exports to Mexico rose by 5%.

U.S. LNG exports. The natural gas pipeline flows to the Sabine Pass liquefaction terminal averaged 0.66 Bcf/d. Two vessels (with LNG-carrying capacities of 3.0 and 3.7 Bcf) are currently loading at the terminal. Although these ships are loading, no ships departed the terminal over the period, and therefore no exports occurred.

more price data

Storage:

Working gas rises in Lower 48 states but by less than average. Net injections into storage totaled 34 Bcf, compared with the five-year (2011-15) average net injection of 61 Bcf and last year's net injections of 70 Bcf during the same week. Working gas stocks total 3,277 Bcf, 559 Bcf above the five-year average and 471 Bcf above last year at this time.

Pacific region stocks continue to decline. Working gas stocks in the Pacific region are only 6 Bcf above the five-year average, after starting the refill season on April 1 60 Bcf above it. Working gas design capacity in the region totaled 416 Bcf in late 2015, so that 60 Bcf represented 14% of total available storage. The Pacific region remains the only region in the Lower 48 states that is currently below last year's stock levels. For the past five years, this calendar week showed an average injection of 5 Bcf for the region, compared to this week's net withdrawal of 1 Bcf.

Spread to the January futures price remains stable. During the most recent storage week, the average natural gas spot price at the Henry Hub was $2.79/MMBtu, while the Nymex futures price of natural gas for delivery in January 2017 averaged $3.34/MMBtu, a difference of 55¢/MMBtu. A year ago, the premium was 38¢/MMBtu. The average Henry Hub price so far in the injection season this year, from April 1 to July 15, is $2.24/MMBtu, 19% lower than the average value of $2.75/MMBtu for the same period last year. Earlier during this year's refill season, the premium exceeded $1/MMBtu.

Stock change is just below analyst expectations. Expected net injections for the week ranged from 35 to 60 Bcf, with a median of 39 Bcf, as reported by Bloomberg. This week's Weekly Natural Gas Storage Report (WNGSR) figure was below the low end of expectations. Prices for the Nymex futures contract for August delivery at the Henry Hub rose about 3¢/MMBtu to $2.69/MMBtu, with 398 contracts traded at the release of the WNGSR.

Continuing hot weather means elevated cooling demand for natural gas. Temperatures in the Lower 48 states averaged 77°F, 2°F above the normal and 2°F above last year at this time. Cooling degree-days in the Lower 48 states totaled 83, compared to the normal of 72. With the exception of New England, every Census Region featured above-normal temperatures for the report week.

more storage data

See also:



Natural gas spot prices
Spot Prices ($/MMBtu)
Thu,
14-Jul
Fri,
15-Jul
Mon,
18-Jul
Tue,
19-Jul
Wed,
20-Jul
Henry Hub
2.77
2.67
2.81
2.81
2.72
New York
2.58
1.77
2.00
1.89
2.21
Chicago
2.73
2.63
2.82
2.77
2.72
Cal. Comp. Avg.*
2.81
2.64
2.86
2.86
2.82
Futures ($/MMBtu)
August contract
2.727
2.756
2.722
2.728
2.658
September contract
2.707
2.728
2.692
2.689
2.621
*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: (7/14/16 - 7/20/16)
Average daily values (Bcf/d):
this week
last week
last year
Marketed production
80.1
80.6
81.7
Dry production
72.6
73.1
73.7
Net Canada imports
7.2
6.3
6.0
LNG pipeline deliveries
0.2
0.2
0.2
Total supply
80.0
79.7
79.9

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: Gas Week: (7/14/16 - 7/20/16)
Average daily values (Bcf/d):
this week
last week
last year
U.S. consumption
63.2
62.0
62.2
    Power
36.6
35.2
34.9
    Industrial
19.5
19.5
19.4
    Residential/commercial
7.1
7.3
7.9
Mexico exports
3.8
3.6
3.3
Pipeline fuel use/losses
6.8
6.7
6.7
LNG pipeline receipts
0.7
0.7
0.0
Total demand
74.4
72.9
72.1

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, July 15, 2016
Change from
 
last week
last year
Oil rigs
357
1.7%
-44.0%
Natural gas rigs
89
1.1%
-59.2%
Miscellaneous
1
0.0%
0.0%
Rig numbers by type
Fri, July 15, 2016
Change from
 
last week
last year
Vertical
60
-1.6%
-51.2%
Horizontal
344
0.3%
-47.1%
Directional
43
19.4%
-48.8%
Source: Baker Hughes Inc.


Working gas in underground storage
Stocks
billion cubic feet (Bcf)
Region
2016-07-15
2016-07-08
change
East
697
678
19
Midwest
801
785
16
Mountain
210
208
2
Pacific
318
319
-1
South Central
1,251
1,253
-2
Total
3,277
3,243
34
Source: U.S. Energy Information Administration
Working gas in underground storage
Historical comparisons
Year ago
(7/15/15)
5-year average
(2011-2015)
Region
Stocks (Bcf)
% change
Stocks (Bcf)
% change
East
622
12.1
633
10.1
Midwest
629
27.3
655
22.3
Mountain
166
26.5
158
32.9
Pacific
336
-5.4
312
1.9
South Central
1,053
18.8
959
30.4
Total
2,806
16.8
2,718
20.6
Source: U.S. Energy Information Administration


Temperature -- heating & cooling degree days (week ending Jul 14)
 
HDD deviation from:
 
CDD deviation from:
Region
HDD Current
normal
last year
CDD Current
normal
last year
New England
6
5
5
33
-7
-16
Middle Atlantic
0
-1
0
66
11
9
E N Central
0
-1
-4
71
16
30
W N Central
0
-3
-1
71
2
-3
South Atlantic
0
0
0
115
19
7
E S Central
0
0
0
105
12
-5
W S Central
0
0
0
141
19
14
Mountain
3
-3
3
83
6
17
Pacific
3
-1
2
41
1
4
United States
1
-1
0
83
11
9
Note: HDD = heating degree-day; CDD = cooling degree-day

Source: National Oceanic and Atmospheric Administration

Average temperature (°F)

7-Day Mean ending Jul 14, 2016

Mean Temperature (F) 7-Day Mean ending Jul 14, 2016

Source: NOAA/National Weather Service

Deviation between average and normal (°F)

7-Day Mean ending Jul 14, 2016

Mean Temperature Anomaly (F) 7-Day Mean ending Jul 14, 2016

Source: NOAA/National Weather Service