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Natural Gas Weekly Update

for week ending August 14, 2013  |  Release Date:  August 15, 2013  |  Next Release: August 22, 2013

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

In the News:

Deep Panuke starts limited natural gas production

Encana Corporation confirmed to EIA staff that natural gas production from the Deep Panuke platform offshore Nova Scotia began earlier this week, but only in limited quantities as long-delayed operations ramp up to full production. Even with this modest beginning, there appear to be price effects in the northeastern United States.

On August 2, the Canada-Nova Scotia Offshore Petroleum Board (CNSOPB) authorized Encana’s Deep Panuke production project to start operations, 15 years after the first discovery well was drilled there in 1998. Natural gas produced in Deep Panuke, which is located 109 miles offshore Nova Scotia, Canada, flows on the Maritimes and Northeast Pipeline, which serves markets in Nova Scotia and New Brunswick, Canada, and the northeastern United States. Gas can travel as far south as Massachusetts on the 684-mile mainline transmission pipeline.

On the date of the authorization announcement, both the September and October futures contracts for Algonquin Citygate, serving Boston, fell by more than 14 cents per million British thermal units (MMBtu) against the average July trading price for those months. Similarly, prices for the November contract fell nearly 8 cents per MMBtu. Prices have recovered since then, but still remain lower than the July average.

In a report released August 12, the CNSOPB announced that the Deep Panuke project has started producing natural gas. Despite these initial flows, Encana anticipates it will take more time before steady state production is reached from the platform. The full production ramp-up time is estimated to take one month, eventually flowing up to 300 million cubic feet per day—the capacity for the platform—after the four production wells are brought on one by one. The Deep Panuke natural gas field has an expected life of 13 years and has estimated recoverable gas resources of up to 892 billion cubic feet (Bcf). Spain’s Repsol has contracted for 100% of Deep Panuke gas production.

In the near-term, production from the Deep Panuke project should help alleviate some Northeast winter price volatility and generally put downward pressure on natural gas prices in the areas served by the Maritimes & Northeast Pipeline. However, with natural gas production in Pennsylvania’s Marcellus Shale growing and numerous projects underway or planned to move that gas into New England, Deep Panuke gas could face even greater competition in the U.S. markets within a few years.

Overview:

(For the Week Ending Wednesday, August 14 , 2013)

  • With continued below-normal summer temperatures for much of the country, natural gas spot prices at most trading locations remained flat compared to last week. The Henry Hub spot price ended the report week (Wednesday, August 7, to Wednesday, August 15) at $3.36 per MMBtu, up 4 cents per MMBtu from $3.32 per MMBtu at the beginning of the report period.
  • At the New York Mercantile Exchange (Nymex), the price of the near-month (September 2013) contract rose nearly 10 cents per MMBtu, from $3.247 per MMBtu last Wednesday to $3.342 per MMBtu yesterday.
  • Working natural gas in storage increased to 3,006 Bcf as of Friday, August 9, according to the U.S. Energy Information Administration's (EIA) Weekly Natural Gas Storage Report (WNGSR). A net storage injection of 65 Bcf for the week resulted in storage levels 7.7% below year-ago levels and 1.5% above the 5-year average.
  • The natural gas rotary rig count, as reported by Baker Hughes Incorporated, totaled 386 active units as of August 9, down 2 units from last week. The oil rig count decreased by 3 units to 1,385 rotary rigs.
  • The average natural gas plant liquids composite price was nearly flat last trading week (covering August 5 through August 9) compared to the week before, increasing by 1%, from $9.59 per MMBtu to $9.69 per MMBtu. The Mont Belvieu ethane spot price fell by 3% during this period, while propane and butane prices increased by 4% and 1%, respectively. Natural gasoline and isobutane spot prices were flat.

more summary data

Prices/Demand/Supply:

Prices remain flat or slightly up. With continuing moderate summer weather, the Henry Hub spot price was nearly flat for the report week, increasing by 4 cents per MMBtu to $3.36 per MMBtu as of yesterday. Temperatures in the Northeast and parts of the Midwest warmed up week-on-week, despite still being below the seasonal norm. This contributed to increases in natural gas consumption for power generation in these regions. Algonquin Citygate, serving Boston, posted one of few noticeable price increases during the report period. It traded at $3.36 per MMBtu last Wednesday, August 7, reached $3.58 on Monday, and settled at $3.41 yesterday.

In the Pacific Northwest, temperatures were above the seasonal norm, pushing electric-sector consumption up and prompting increased Canadian imports in the West. The Sumas trading point in northwest Washington increased by 21 cents per MMBtu over the report period, closing at $3.08 per MMBtu yesterday. The Sumas price was 28 cents per MMBtu below the Henry Hub price as of yesterday.

At the Nymex, the price of the September 2013 contract increased slightly. The price of the near-month futures contract increased nearly 10 cents per MMBtu, going from $3.247 per MMBtu last Wednesday to $3.342 yesterday. The 12-month strip increased by 9 cents, from $3.557 per MMBtu on August 7 to $3.647 yesterday.

Increased power-sector demand raised total consumption 1.8% compared to last week. Natural gas demand was up, driven by a 3.1% increase in electric-sector consumption. Temperatures in the Northeast and parts of the Midwest rose from unseasonably cool summer weather, raising electric-sector gas consumption by 15.9% and 20.9%, respectively, week-over-week. The Pacific Northwest experienced above-normal temperatures for the week, driving electric-sector consumption up 12.4% over last week. The Southeast went from slightly below-normal to slightly above-normal weather, prompting a 6.1% increase in electric-sector consumption. The Southeast is the largest natural-gas consuming region for electricity generation.

Texas and the Midcontinent regions both consumed 10.3% less gas for electricity generation than the week before. Every region except the Pacific Northwest is consuming less natural gas for this sector than a year ago. Nationally, the electric sector is consuming 13.6% less gas than a year ago.

Residential and commercial consumption rose by 1.6%, contributing to the overall demand increase. During the report week, temperatures averaged between 60 and 70 degrees Fahrenheit in much of the northern half of the country, which prompted some amount of home heating at night. Industrial consumption of natural gas stayed flat for the report week, increasing by 0.1%. Exports to Mexico fell by 4.9%.

Supply decreased by 0.3% over last week because of lower production. Dry natural gas production, which is the largest contributor to U.S. natural gas supply, was down 0.9%. Net Canadian imports increased by 8.0%, partially offsetting the decrease in production. Canadian imports in the West increased by 9.1% to meet electric-sector demand in the Pacific Northwest, driving the overall increase in imports. LNG imports also increased, but are a minor contributor to supply.

more price data

Storage

Working natural gas in storage increased to 3,006 Bcf as of Friday, August 9, according to EIA's WNGSR. The 65-Bcf gain in storage levels was significantly higher than both the 20-Bcf injection that occurred during the same week in 2012 and the 5-year average increase of 42 Bcf. Current inventories are 252 Bcf (7.7%) less than last year at this time and 43 Bcf (1.5%) above the 5-year average of 2,963 Bcf.

The net injection was smaller than market expectations, which on average were reported to be around 70 Bcf. The lower-than-expected build contributed to natural gas prompt-month Nymex futures prices increasing by about 2 cents per MMBtu to just around $3.39 per MMBtu immediately following WNGSR's release. In the hour following the release, prices remained around that level.

Despite a higher-than-average build, the East region remains below its 5-year average. However, net injections in the East region were 6 Bcf higher than its 5-year average injections, growing by 51 Bcf. The Producing region’s net injection this week was 4 Bcf, compared with that region’s 5-year average net withdrawal of 6 Bcf. In that region, despite a decrease of 4 Bcf in salt cavern facilities, inventories in nonsalt cavern facilities grew by 8 Bcf.

Marginally cooler-than-normal temperatures during the storage report week supported this week's greater-than-average net injection. Temperatures in the Lower 48 states averaged 0.9 degrees cooler than the 30-year normal temperature and 4.0 degrees cooler than the same period last year, and averaged 74.1 degrees for the week, compared to 78.1 degrees last year and the 30-year normal of 75.0 degrees.

more storage data

See also:



Natural gas spot prices
Spot Prices ($/MMBtu)
Thu,
08-Aug
Fri,
09-Aug
Mon,
12-Aug
Tue,
13-Aug
Wed,
14-Aug
Henry Hub
3.27
3.32
3.34
3.34
3.36
New York
3.42
3.40
3.50
3.44
3.47
Chicago
3.36
3.37
3.44
3.42
3.44
Cal. Comp. Avg,*
3.33
3.33
3.48
3.44
3.48
Futures ($/MMBtu)
September Contract
3.297
3.230
3.310
3.285
3.342
October Contract
3.321
3.257
3.335
3.312
3.365
*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: (8/7/13 - 8/14/13)
Percent change for week compared with:
 
last year
last week
Gross Production
1.45%
-0.95%
Dry Production
1.43%
-0.95%
Canadian Imports
-11.96%
8.01%
      West (Net)
6.84%
9.09%
      MidWest (Net)
1.32%
2.10%
      Northeast (Net)
-104.05%
-69.17%
LNG Imports
-36.34%
7.37%
Total Supply
0.04%
-0.30%
Source: BENTEK Energy LLC
U.S. Consumption - Gas Week: (8/7/13 - 8/14/13)
Percent change for week compared with:
 
last year
last week
U.S. Consumption
-6.93%
1.82%
Power
-13.55%
3.08%
Industrial
0.00%
0.06%
Residential/Commercial
1.86%
1.58%
Total Demand
-6.64%
1.60%
Source: BENTEK Energy LLC
Natural gas supply


Weekly natural gas rig count and average Henry Hub
Rigs
Fri, August 09, 2013
Change from
 
last week
last year
Oil Rigs
1,385
-0.22%
-3.28%
Natural Gas Rigs
386
-0.52%
-22.02%
Miscellaneous
7
16.67%
75.00%
Rig Numbers by Type
Fri, August 09, 2013
Change from
 
last week
last year
Vertical
447
3.47%
-17.68%
Horizontal
1,065
-0.75%
-8.27%
Directional
266
-3.97%
17.18%
Source: Baker Hughes Inc.


Working Gas in Underground Storage
Stocks
billion cubic feet (bcf)
Region
8/9/13
8/2/13
change
East
1,459
1,408
51
West
494
484
10
Producing
1,053
1,049
4
Total
3,006
2,941
65
Source: U.S. Energy Information Administration
Working Gas in Underground Storage
Historical Comparisons
Year ago
(8/9/12)
5-year average
(2008-2012)
Region
Stocks (Bcf)
% change
Stocks (Bcf)
% change
East
1,660
-12.1
1,558
-6.4
West
494
0.0
438
12.8
Producing
1,105
-4.7
967
8.9
Total
3,258
-7.7
2,963
1.5
Source: U.S. Energy Information Administration


Temperature -- Heating & Cooling Degree Days (week ending Aug 08)
 
HDD deviation from:
 
CDD deviation from:
Region
HDD Current
normal
last year
CDD Current
normal
last year
New England
4
2
4
21
-22
-48
Middle Atlantic
3
1
3
35
-22
-46
E N Central
7
2
6
32
-22
-43
W N Central
5
2
4
49
-18
-37
South Atlantic
0
0
0
91
-4
-18
E S Central
0
0
0
87
-6
-26
W S Central
0
0
0
151
27
-4
Mountain
1
-2
0
90
16
-2
Pacific
0
-2
0
48
1
-15
United States
3
0
2
67
-6
-26
Note: HDD = heating degree-day; CDD = cooling degree-day

Source: National Oceanic and Atmospheric Administration

Average temperature (°F)

7-Day Mean ending Aug 08, 2013

Mean Temperature (F) 7-Day Mean ending Aug 08, 2013

Source: NOAA/National Weather Service

Deviation between average and normal (°F)

7-Day Mean ending Aug 08, 2013

Mean Temperature Anomaly (F) 7-Day Mean ending Aug 08, 2013

Source: NOAA/National Weather Service