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Natural Gas Weekly Update

for week ending April 27, 2016  |  Release Date:  April 28, 2016  |  Next Release: May 5, 2016

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

In the News:

Natural gas production declines

Dry natural gas production in the Lower 48 states has declined from a February high. Average daily production was 1.5% lower in March than in February, according to Bentek Energy. Recent data show this decline continued in April, with average daily production from April 1 through April 23 1.0% lower than average production in March, and a full 2.5% lower than the average production in February. Compared to last year, average February production this year was 2.3% higher. However, March production was only 0.4% higher, and April production so far has been 1.0% lower.

Factors affecting current production trends include:

  • Average weekly natural gas spot prices at Henry Hub have remained below $2.50 per million British thermal unit (MMBtu) since last October. The Marcellus and Utica shale plays, where much of the production growth has occurred, showed even lower prices.
  • Delays on and cancellation of other pipeline projects designed to distribute Marcellus and Utica natural gas–including the recent cancellation of the proposed Northeast Direct Pipeline, and the proposed Constitution Pipeline's failure to obtain a key water quality permit–will constrain gas movement in the key Northeast market.
  • According to Baker Hughes, the number of oil and gas rigs in the Lower 48 states is the lowest it has been since Baker Hughes began tracking rig counts in 1949.
  • Capital expenditures by many natural gas companies have decreased. Data from Evaluate Energy show a group of U.S. energy companies, which in 2015 together produced more than 15 billion cubic feet per day (Bcf/d) (17% of the U.S. total), reduced their combined capital expenditures by nearly 40% from 2014 to 2015 (see graph).
  • Warmer-than-normal weather persisted through the winter, which along with higher production levels resulted in record-high gas stocks for the end of the heating season–2,478 billion cubic feet on March 31, or 54% higher than the five-year (2011–15 ) end-of-March average.

In the short term, production is forecast to continue its decline. EIA's April Drilling Productivity Report projects March-to-May decreases in gas production in six of the seven key shale regions in the Lower 48 states.

Overview:

(For the Week Ending Wednesday, April 27, 2016)

  • Natural gas spot prices outside of the Northeast decreased at most locations this report week (Wednesday, April 20, to Wednesday, April 27). The Henry Hub spot price fell from $2.02/MMBtu last Wednesday to $1.88/MMBtu yesterday.
  • At the New York Mercantile Exchange (Nymex), the May 2016 contract price also fell over the report week, from $2.069/MMBtu last Wednesday to $1.995/MMBtu yesterday, when the contract month closed. The near-month Nymex price is now for June delivery.
  • Net injections to working gas totaled 73 Bcf for the week ending April 22. Working gas stocks are 2,557 Bcf, which is 52% above the year-ago level and 48% above the five-year (2011-15) average for this week.
  • According to Baker Hughes data, for the week ending April 22, the natural gas rig count fell by 1 to 88, and oil-directed rigs fell by 8 to 343. The total rig count fell by 9, and now stands at 431.
  • The natural gas plant liquids (NGPL) composite price at Mont Belvieu, Texas, rose by 1.3% to $4.75/MMBtu for the week ending Friday, April 22. The increase of the NGPL composite price was driven by an 8.1% jump in the ethane price. Propane, butane, and isobutane all increased, rising by 0.1%, 0.8%, and 0.5%, respectively. Natural gasoline fell by 1.8%.

more summary data

Prices/Supply/Demand:

Henry Hub spot prices fall back below $2/MMBtu. The Henry Hub spot price shed 14¢ this week, declining from $2.02/MMBtu to $1.88/MMBtu. Price points almost everywhere outside of the Northeast saw declines. At the Chicago Citygate, prices fell from $1.98/MMBtu to $1.93/MMBtu. At the PG&E Citygate in California, the spot price fell from $2.09/MMBtu last Wednesday to $2.03/MMBtu yesterday.

Northeast prices up on cold weather. The Northeast experienced a bout of unusually cold April weather, with daily temperatures reaching near 30° in parts of the region. At the Algonquin Citygate, which serves Boston-area consumers, prices started at $2.28/MMBtu last Wednesday, rising to $2.90/MMBtu yesterday. By contrast, prices at Transcontinental Pipeline's Zone 6 trading point for New York were essentially flat for the report period, moving from $1.46/MMBtu to $1.47/MMBtu Wednesday to Wednesday.

Marcellus prices up slightly. The Tennessee Zone 4 Marcellus price rose from $1.28/MMBtu last Wednesday to $1.33/MMBtu yesterday. The price at Dominion South in northwest Pennsylvania was essentially flat, moving from $1.36/MMBtu to $1.37/MMBtu week over week.

Nymex prices fall. At the New York Mercantile Exchange (Nymex), the May 2016 contract price fell over the report week, from $2.069/MMBtu last Wednesday to $1.995/MMBtu yesterday, when the contract settled. The near-month Nymex price is now for June delivery. This report week the 12-month strip, averaging May 2016 through April 2017 contracts, has been between 50¢ and 70¢ above the near-month contract price, indicating market expectations that prices will likely rise over the next year.

Supply down. Total supply fell by 0.4% for the report period, driven by a 0.3% week-over-week decline in dry production, according to data from Bentek Energy. Imports from Canada this week decreased by 2.4%, declining in every region but the Midwest. The sendout from LNG import terminals increased, but is a minor contributor to overall supply.

Consumption falls. Overall consumption this week fell by 1.7% as temperatures in the West continue to moderate, offsetting cold weather in the Northeast and Midwest. Residential and commercial consumption fell by 4.7%, along with industrial consumption, which fell by 1.2%, and exports to Mexico, which fell by 1.0%. Consumption of natural gas for electric power generation rose by 0.9%, as daily temperatures in the some parts of the Gulf Coast and Southeast neared 80°, driving up cooling demand in those regions.

more price data

Storage:

Working gas stocks climb for second straight week. Working gas in the Lower 48 states posted its first back-to-back reported net injection of the young refill season, which began on April 1. Net injections into storage totaled 73 Bcf during the storage report week, compared with the five-year (2011-15) average of 52 Bcf and last year's net injection of 84 Bcf during the same week. As a result, the surplus in storage compared with the five-year average rose from the previous week to 832 Bcf, and the surplus compared with year-ago levels decreased to 870 Bcf. Cumulative net injections of working gas during the 2016 refill season total 77 Bcf, compared with the five-year average of 119 Bcf.

The refill season gets underway across the Lower 48 states. Net injections were reported in all five of the storage regions for the first time this year. The East and Midwest regions posted their first weekly net injections of the 2016 refill season, reporting stock builds of 23 and 16 Bcf, respectively. Net injections exceeded or equaled the five-year average in each of the storage regions.

January futures price rises to more than $1 above current spot price. Decisions about whether to inject gas into storage during the refill season are often made with an eye toward the upcoming January, because it is typically the coldest winter month. During the most recent storage week, the average natural gas spot price at the Henry Hub was $1.90/MMBtu, while the Nymex futures price of natural gas for delivery in January 2017 averaged $3.08/MMBtu, a difference of $1.18/MMBtu. A year ago, the premium was 57¢/MMBtu, suggesting there is more financial incentive this year to buy and store natural gas in the summer for sale in the winter. The average Henry Hub price through the injection season from April 1 to April 22 this year was $1.90/MMBtu, 27% lower than the average value of $2.60/MMBtu for the same three weeks last year.

Stock change is within the range of analyst expectations. Expected net injections for the week generally ranged from 65 to 81 Bcf, with a median of 70 Bcf. At the release of the Weekly Natural Gas Storage Report, the price for the natural gas futures contract on the Nymex for June delivery at the Henry Hub fell 1¢/MMBtu to $2.09/MMBtu, with 308 trades executed at the release.

Temperatures are above normal in most of the Lower 48 states. Temperatures in the Lower 48 states averaged 54°F during the storage report week, 10% above normal and 3% above last year at this time.

more storage data

See also:

Total dry gas production in the Lower 48 states
Capital expenditures


Natural gas spot prices
Spot Prices ($/MMBtu)
Thu,
21-Apr
Fri,
22-Apr
Mon,
25-Apr
Tue,
26-Apr
Wed,
27-Apr
Henry Hub
1.94
1.89
1.97
1.88
1.88
New York
1.37
1.42
1.50
1.43
1.47
Chicago
1.93
1.89
1.96
1.92
1.93
Cal. Comp. Avg,*
1.89
1.83
1.94
1.85
1.85
Futures ($/MMBtu)
May contract
2.068
2.140
2.063
2.032
1.995
June contract
2.208
2.267
2.187
2.159
2.153
*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: (4/20/16 - 4/27/16)
Percent change for week compared with:
 
last year
last week
Gross production
-2.6%
-0.3%
Dry production
-2.6%
-0.3%
Canadian imports
2.0%
-2.4%
      West (net)
3.1%
-0.8%
      Midwest (net)
19.4%
4.1%
      Northeast (net)
-127.0%
-163.0%
LNG imports
300.0%
2.2%
Total supply
-2.0%
-0.4%
Source: BENTEK Energy LLC
U.S. consumption - Gas Week: (4/20/16 - 4/27/16)
Percent change for week compared with:
 
last year
last week
U.S. consumption
-6.1%
-1.8%
Power
5.3%
0.9%
Industrial
-2.8%
-1.2%
Residential/commercial
-22.1%
-4.7%
Total demand
-4.5%
-1.7%
Source: BENTEK Energy LLC
Natural gas supply


Weekly natural gas rig count and average Henry Hub
Rigs
Fri, April 22, 2016
Change from
 
last week
last year
Oil rigs
343
-2.28%
-51.21%
Natural gas rigs
88
-1.12%
-60.89%
Miscellaneous
0
0.00%
-100.00%
Rig numbers by type
Fri, April 22, 2016
Change from
 
last week
last year
Vertical
51
-5.56%
-57.85%
Horizontal
332
-0.90%
-53.89%
Directional
48
-5.88%
-47.25%
Source: Baker Hughes Inc.


Working gas in underground storage
Stocks
billion cubic feet (bcf)
Region
2016-04-22
2016-04-15
change
East
431
408
23
Midwest
554
538
16
Mountain
155
152
3
Pacific
277
271
6
South Central
1,140
1,115
25
Total
2,557
2,484
73
Source: U.S. Energy Information Administration
Working gas in underground storage
Historical comparisons
Year ago
(4/22/15)
5-year average
(2011-2015)
Region
Stocks (Bcf)
% change
Stocks (Bcf)
% change
East
287
50.2
332
29.8
Midwest
292
89.7
350
58.3
Mountain
118
31.4
112
38.4
Pacific
280
-1.1
219
26.5
South Central
710
60.6
712
60.1
Total
1,687
51.6
1,725
48.2
Source: U.S. Energy Information Administration


Temperature -- heating & cooling degree days (week ending Apr 21)
 
HDD deviation from:
 
CDD deviation from:
Region
HDD Current
normal
last year
CDD Current
normal
last year
New England
105
-21
5
0
0
0
Middle Atlantic
73
-37
3
0
0
0
E N Central
50
-63
-34
0
0
0
W N Central
52
-51
-37
0
-1
0
South Atlantic
39
-12
12
17
1
-14
E S Central
19
-28
-8
5
0
-2
W S Central
15
-5
-2
31
8
4
Mountain
106
-1
2
8
-1
1
Pacific
17
-46
-17
6
3
6
United States
48
-36
-13
8
1
-1
Note: HDD = heating degree-day; CDD = cooling degree-day

Source: National Oceanic and Atmospheric Administration

Average temperature (°F)

7-Day Mean ending Apr 21, 2016

Mean Temperature (F) 7-Day Mean ending Apr 21, 2016

Source: NOAA/National Weather Service

Deviation between average and normal (°F)

7-Day Mean ending Apr 21, 2016

Mean Temperature Anomaly (F) 7-Day Mean ending Apr 21, 2016

Source: NOAA/National Weather Service