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Natural Gas Weekly Update

for week ending August 28, 2013  |  Release Date:  August 29, 2013  |  Next Release: September 5, 2013

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

In the News:

Decreased Canadian Mainline gas flows constrain prices in western Canada, Pacific Northwest

Prices in the Pacific Northwest and nearby regions in Canada have remained low compared to last year because of the ample availability of Canadian natural gas. While natural gas production has steadily increased since last year in the western Canadian province of Alberta, lower volumes of it are being sent on TransCanada Pipelines’ Canadian Mainline pipeline, which moves gas from Alberta eastwards through Canada, with connections into the midwestern and northeastern United States. The result is an increase in natural gas stranded in the western portions of the Mainline, which has pushed down gas prices in western Canada and prevented price growth in the northwestern United States, despite an increase in demand there over year-ago levels.

From April 1 to August 28, the differences between the spot price for gas traded at Niska’s AECO Hub in Alberta to the Henry Hub spot price have averaged 80 cents per million British thermal units (MMBtu), compared to 57 cents per MMBtu during the same time period in 2012. The AECO Hub has traded at a discount of at least $1.00 per MMBtu to the Henry Hub spot price on most days since mid-July. In addition, the difference between spot prices at Northwest Sumas, a major trading hub in the northwestern United States, and Henry Hub have remained essentially flat at a discount for Sumas gas of around 25 cents per MMBtu, despite the fact that natural gas demand for power burn rose in the Pacific Northwest while declining in every other region of the country.

Natural gas production in Alberta between April 1 and August 28 rose by 0.8% over year-ago levels to 11.07 billion cubic feet per day (Bcf/d), according to U.S. Energy Information Administration (EIA) calculations with data from Bentek Energy. However, during this time, exports to the midwestern and northeastern United States on the TransCanada’s Mainline declined below 2012 levels by 41%, or 1.09 Bcf/d. This includes a 0.79 Bcf/d decline in gas traveling through Manitoba interconnects with the Great Lakes Gas Transmission pipeline serving the midwestern United States and a combined 0.30 Bcf/d decline via interconnects in Ontario and Quebec serving the northeastern United States. Lower demand for natural gas from U.S. electric generators has contributed to this decrease: from April 1 to August 28, natural gas consumption for power burn in the Northeast declined by 16.9%, or 1.08 Bcf/d, below 2012 levels, while power burn in the Midwest declined by 42.9%, or 0.93 Bcf/d, below year-ago levels.

While gas deliveries to the east on the TransCanada Mainline have declined, Canadian gas delivered to the northwestern United States on the TransCanada Foothills pipeline’s interconnect with the Gas Transmission Northwest pipeline has risen by 0.12 Bcf/d, more than offsetting the 0.03 Bcf/d decrease in gas sent to the United States on Spectra Energy’s WestCoast Pipeline, which interconnects with the Williams Northwest Pipeline at the Sumas compressor station. Drier summer weather, particularly in July and August, has increased the need for gas-fired generation in the Northwest to replace hydropower, with drier weather generally occurring in parts of the region that receive more service from Foothills. Between April 1 and August 28, the amount of gas burned for power in the Pacific Northwest (Washington, Oregon, and Idaho) more than doubled over year-ago levels, reaching 0.46 Bcf/d, compared to 0.22 Bcf/d for the same dates in 2012.

Overview:

(For the Week Ending Wednesday, August 28, 2013)

  • Natural gas hub prices were generally flat at the beginning of the report week (Wednesday to Wednesday), but dipped at some locations heading into the weekend, before rising through the end of the report week. The Henry Hub spot price closed yesterday at $3.54 per MMBtu, up 3 cents per MMBtu from the beginning of the report week. Prices in New England and New York dipped on Thursday, August 22 and Friday, August 23, but then recovered through the end of trading yesterday. Prices at most other major hubs saw some dip over the weekend, but then recovered to close yesterday higher than where they were on Wednesday, August 21.
  • At the Nymex, futures prices increased for the third consecutive report week. The near-month contract (September 2013) rose from $3.460 per MMBtu to $3.567 per MMBtu yesterday, its final day as the near-month contract.
  • Working natural gas in storage increased to 3,130 Bcf as of Friday, August 23, according to EIA’s Weekly Natural Gas Storage Report (WNGSR). A net storage injection of 67 Bcf for the week resulted in storage levels 7.0% below year-ago levels and 1.5% above the 5-year average.
  • The Baker Hughes natural gas rotary rig count totaled 387 active units as of Friday, August 23, a decrease of 1 rig from the previous week. The oil rig count decreased by 15 to 1,382.
  • The weekly average natural gas plant liquids composite price rose this week (covering August 19 through 23) compared to the previous week by 3.7%, and is now at $10.57 per MMBtu. Natural gas plant liquids prices increased by between 2% and 4%, except for propane, which increased by 5.6% to $12.10 per MMBtu, and isobutane, which rose by 1.6% to $14.61 per MMBtu.

more summary data

Prices/Demand/Supply:

Natural gas prices dipped during the weekend due to cooler weather, and increased through yesterday. The Henry Hub spot price increased by 3 cents per MMBtu Wednesday-to-Wednesday, closing the report week at $3.54 per MMBtu. Prices at most locations decreased over the weekend but then increased on Monday, and closed trading yesterday above week-ago levels. A big drop over the weekend took place in the Northeast, where temperatures fell over the weekend to 70 degrees Fahrenheit, from 77 degrees at the beginning of the report week.

At Algonquin Citygate, which serves the Boston market, prices fell from $3.92 per MMBtu on Wednesday, August 21, to $3.38 per MMBtu on Friday, August 23, a 54 cent per MMBtu decline. Similarly, prices fell by 16 cents per MMBtu between these two dates at the Transco Zone 6-New York trading hub, from $3.63 per MMBtu to $3.47 per MMBtu. Prices at Northwest Sumas trading point, which serves consumers in the Pacific Northwest, fell by 9 cents per MMBtu between these two dates, from $3.21 per MMBtu to $3.12 per MMBtu, as temperatures there dipped below 70 degrees. Prices at all three of these hubs recovered between Monday, August 26, and Wednesday, August 28, as temperatures rose back into the high 70s in the Northeast, and the low 70s in the Pacific Northwest.

At Algonquin Citygate, prices finished trading yesterday at $3.78 per MMBtu, still 14 cents per MMBtu below their level on Wednesday, August 21. Prices at Transco Zone 6-NY and most other major hubs traded up on Monday through Wednesday of this week to the point that they were higher than week-ago levels, including Northwest Sumas, which increased by 18 cents per MMBtu Wednesday-to-Wednesday, and Chicago Citygate, which increased Wednesday-to-Wednesday by 11 cents per MMBtu.

At the Nymex, the price of the September 2013 contract increased slightly. The price of the September 2013 contract rose for the third consecutive report week, from $3.460 per MMBtu last Wednesday to $3.567 per MMBtu yesterday, its final day as the front-month contract. The October 2013 contract, which becomes the front month contract today, closed yesterday at $3.582 per MMBtu. The 12-month strip (the average of the 12 contracts between September 2013 and August 2014) increased from $3.771 per MMBtu last Wednesday to $3.821 yesterday.

Consumption increased during the report week, largely due to higher power demand. Total consumption in the Lower 48 states increased by 2.6% from the previous report week, according to Bentek, to 58.8 Bcf/d, but remained below the 59.6 Bcf/d average from two weeks ago. For the week, power sector consumption of natural gas (power burn) rose by 2.3 Bcf/d (8.5%) over last week to 29.1 Bcf/d, its highest level for the last five report weeks. Lower 48 power burn totaled 31.3 Bcf/d on Thursday, August 22, its highest level since July 19, 2013. It then fell to almost 26 Bcf/d over the weekend as temperatures cooled, and increased Tuesday and yesterday as temperatures recovered.

The highest weekly increase in power burn occurred in the Midwest (0.8 Bcf/d), followed by Texas and the Southeast (0.6 Bcf/d each). These increases, combined with increases in the Northeast and Midcontinent Producing region, outweighed a combined decrease of almost 0.6 Bcf/d, which primarily occurred in the Southwest.

This week’s 2.3 Bcf/d increase in total Lower 48 power burn, plus a 0.3 Bcf/d week-on-week increase in natural gas exports to Mexico at Texas border points, offset a combined 0.9 Bcf/d weekly decrease in industrial consumption, residential/commercial consumption, and exports to Mexico at Southwest border points.

Supply increased slightly during the report week. Total supply increased by 0.2% to 70.5 Bcf/d, its highest level since the last week of July. Dry gas production, imports from Canada and imports of LNG all rose week-on-week, by 0.1%, 1.5% and 8.0%, respectively. Imports from Canada increased in the West and Northeast, but decreased in the Midwest.

more price data

Storage

Working natural gas in storage increased to 3,130 Bcf as of Friday, August 23, according to EIA's WNGSR. The 67-Bcf gain in storage levels was slightly higher than both the 64-Bcf injection that occurred during the same week in 2012 and the 5-year average increase of 66 Bcf. Current inventories are 235 Bcf (7.0%) less than last year at this time and 45 Bcf (1.5%) above the 5-year average of 3,085 Bcf.

The net injection was larger than market expectations, which on average were reported to be around 62 Bcf. The larger-than-expected build contributed to natural gas prompt-month Nymex futures prices decreasing by about 12 cents per MMBtu to just around $3.52 per MMBtu immediately following WNGSR's release. In the hour following the release, prices remained around that level.

With lower than average builds, the East and West regions remain below their 5-year average storage levels. Both the East and West regions had stock builds lower than their 5-year average, with net injections in the East region growing by 49 Bcf (4 Bcf lower than its 5-year average injection of 53 Bcf) and the West region growing by 2 Bcf (1 Bcf lower than its 5-year average injection of 3 Bcf).

Near normal temperatures during the storage report week supported this week's close-to-average net injection. Temperatures in the Lower 48 states averaged 0.3 degree cooler than the 30-year normal temperature and 0.6 degree warmer than the same period last year, and averaged 73.4 degrees for the week, compared to the 30-year normal of 73.7 degrees and 72.9 degrees last year.

more storage data

See also:



Natural gas spot prices
Spot Prices ($/MMBtu)
Thu,
22-Aug
Fri,
23-Aug
Mon,
26-Aug
Tue,
27-Aug
Wed,
28-Aug
Henry Hub
3.52
3.50
3.55
3.50
3.54
New York
3.55
3.47
3.68
3.67
3.69
Chicago
3.65
3.63
3.74
3.67
3.74
Cal. Comp. Avg,*
3.68
3.65
3.72
3.68
3.73
Futures ($/MMBtu)
September Contract
3.545
3.485
3.513
3.534
3.567
October Contract
3.575
3.521
3.553
3.573
3.582
*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: (8/21/13 - 8/28/13)
Percent change for week compared with:
 
last year
last week
Gross Production
3.16%
0.10%
Dry Production
3.13%
0.10%
Canadian Imports
-6.74%
1.52%
      West (Net)
13.77%
3.36%
      MidWest (Net)
-8.69%
-4.58%
      Northeast (Net)
-97.93%
-121.09%
LNG Imports
-24.88%
7.97%
Total Supply
2.15%
0.24%
Source: BENTEK Energy LLC
U.S. Consumption - Gas Week: (8/21/13 - 8/28/13)
Percent change for week compared with:
 
last year
last week
U.S. Consumption
-1.75%
2.59%
Power
-2.46%
8.49%
Industrial
-2.42%
-0.94%
Residential/Commercial
1.47%
-6.22%
Total Demand
-1.14%
2.95%
Source: BENTEK Energy LLC
Natural gas supply


Weekly natural gas rig count and average Henry Hub
Rigs
Fri, August 23, 2013
Change from
 
last week
last year
Oil Rigs
1,382
-1.07%
-1.85%
Natural Gas Rigs
387
-0.26%
-20.37%
Miscellaneous
7
16.67%
75.00%
Rig Numbers by Type
Fri, August 23, 2013
Change from
 
last week
last year
Vertical
445
0.00%
-14.26%
Horizontal
1,075
-0.19%
-7.25%
Directional
256
-4.83%
16.36%
Source: Baker Hughes Inc.


Working Gas in Underground Storage
Stocks
billion cubic feet (bcf)
Region
8/23/13
8/16/13
change
East
1,555
1,506
49
West
502
500
2
Producing
1,073
1,057
16
Total
3,130
3,063
67
Source: U.S. Energy Information Administration
Working Gas in Underground Storage
Historical Comparisons
Year ago
(8/23/12)
5-year average
(2008-2012)
Region
Stocks (Bcf)
% change
Stocks (Bcf)
% change
East
1,752
-11.2
1,662
-6.4
West
491
2.2
444
13.1
Producing
1,122
-4.4
978
9.7
Total
3,365
-7.0
3,085
1.5
Source: U.S. Energy Information Administration


Temperature -- Heating & Cooling Degree Days (week ending Aug 22)
 
HDD deviation from:
 
CDD deviation from:
Region
HDD Current
normal
last year
CDD Current
normal
last year
New England
3
-1
1
29
-1
-3
Middle Atlantic
4
0
1
36
-8
-1
E N Central
6
0
-8
34
-8
17
W N Central
4
-2
-11
51
-5
22
South Atlantic
2
2
2
76
-11
-9
E S Central
1
1
1
66
-18
-1
W S Central
0
0
0
105
-14
-8
Mountain
0
-9
-3
97
29
20
Pacific
0
-4
0
66
23
-12
United States
3
-1
-3
62
-3
1
Note: HDD = heating degree-day; CDD = cooling degree-day

Source: National Oceanic and Atmospheric Administration

Average temperature (°F)

7-Day Mean ending Aug 22, 2013

Mean Temperature (F) 7-Day Mean ending Aug 22, 2013

Source: NOAA/National Weather Service

Deviation between average and normal (°F)

7-Day Mean ending Aug 22, 2013

Mean Temperature Anomaly (F) 7-Day Mean ending Aug 22, 2013

Source: NOAA/National Weather Service