Natural Gas

‹ See All Natural Gas Reports

Natural Gas Weekly Update

for week ending January 29, 2014  |  Release Date:  January 30, 2014  |  Next Release: February 6, 2014

Previous Issues

Week:  (View Archive)


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

In the News:

Northwest Sumas natural gas price basis reaches five-year winter high

Northwest Sumas, located in Washington on the border with Canada, forms the primary natural gas trading hub for consumers in the Pacific Northwest (Washington, Oregon, and Idaho). Natural gas spot prices at Northwest Sumas averaged $4.61 per million British thermal units (MMBtu) for the first 90 days of the 2013-14 winter season (November 1, 2013, to January 29, 2014), according to EIA calculations using data from SNL Energy. This was the highest average natural gas price over these dates since the 2009-10 winter season, and reflected a 45-cent/MMBtu premium over the national benchmark price at Henry Hub, a five-year winter high. Market conditions at Sumas have reversed dramatically since September, when the spot price there traded at more than $1.00/MMBtu below the Henry Hub spot price.

The Pacific Northwest accounts for 3.9% of the total population of the United States and in 2008-12 it accounted for 2.5% of total U.S. natural gas consumption. However, demand there for natural gas can increase significantly during periods of cold weather. Pacific Northwest natural gas consumption averaged 2.4 billion cubic feet per day (Bcf/d) from November 1, 2013, through January 29, 2014, a 0.4 Bcf/d (18%) increase from consumption for the same days during the 2012-13 winter, according to EIA calculations with data from Genscape. Consumption in the Pacific Northwest reached 2.7 Bcf/d in December 2013, 34% above consumption in December 2012, which averaged 2.0 Bcf/d. Consumption was also 8% above year-ago levels during the first 10 days in January, before dipping below year-ago levels over the past three weeks.

The Northwest Sumas spot price has largely correlated with fluctuations in Pacific Northwest natural gas demand. This was particularly the case during December 7-10, 2013, when demand averaged more than 3.3 billion cubic feet per day (Bcf/d). On December 6, 2013, the natural gas price at Sumas spiked to $11.00/MMBtu. This was the highest spot price at Northwest Sumas in nearly five years. It also represented a $6.86/MMBtu premium over the Henry Hub spot price, the highest premium since mid-2006.

A large portion of this winter's higher demand came from residential and commercial heating, which rose because of cooler temperatures. Natural gas consumption by electric generators also rose, averaging 0.7 Bcf/d from November 1, 2013, to January 29, versus 0.4 Bcf/d for the same period last winter, according to EIA calculations with data from Bentek Energy LLC. This increase in demand for space heating has placed additional pressure on gas availability in the Northwest.

Other factors contributing to higher prices at Northwest Sumas include:

  • More expensive Canadian supply: Most of the gas that reaches the Northwest Sumas hub comes from western Canada, which flows on Spectra Energy's Westcoast Pipeline to Sumas, where it interconnects with the Northwest Pipeline. From November 1, 2013, to January 29, 2014, the average spot price for gas traded at Niska's AECO Hub in Alberta was $3.41/MMBtu. This was 12% above year-ago levels and more than double spot prices in late September. Inflows from Canada into the Pacific Northwest rose by 25%, or 0.6 Bcf/d, over year-ago levels from November 1, 2013, to January 29, 2014, according to Bentek.
  • Strained supply from the Rockies: The Northwest Pipeline also provides Sumas with access to production from basins in the Rocky Mountains. However, supply from the Rockies declined because of wellhead freeze-offs, which occurred at the same time in December as natural gas demand rose in the Pacific Northwest, as well as the southwestern United States, which Rockies production also serves. Gas flowing from the Rockies to the Pacific Northwest decreased 0.5 Bcf/d, or 28%, from November 1, 2013, to January 29, 2014. This has offset most of the increase in Canadian inflows.

Overview:

(For the Week Ending Wednesday, January 29, 2014)

  • With another wave of cold weather, natural gas spot prices rose during the report week (Wednesday, January 22, through Wednesday, January 29) at most locations. The Henry Hub spot price hit its highest level since February 2010 on Monday, January 27, settling at $5.69/ MMBtu.
  • Prices at the New York Mercantile Exchange (Nymex) also reached levels that have not been seen since 2010. Overall prices rose from $4.689/MMBtu last Wednesday to $5.557/MMBtu yesterday.
  • Working natural gas in storage decreased to 2,193 Bcf as of Friday, January 24, according to the U.S. Energy Information Administration (EIA) Weekly Natural Gas Storage Report (WNGSR). A net storage withdrawal of 230 Bcf for the week resulted in storage levels 22.5% below year-ago levels and 16.6% below the 5-year average.
  • The natural gas rotary rig count totaled 356 as of January 24, which represents a decline of 9 rigs from the previous week, and 78 rigs from the same time last year, according to data from Baker Hughes Inc. Oil rigs rose by 8 units to 1,416, which is 101 greater than last year at this time. The total rig count was 1,777, up 24 from a year ago.
  • The weekly average natural gas plant liquids composite price rose 11.4% this week (covering January 21 through January 24) compared to the previous week, and is now at $12.56/MMBtu. Prices of ethane and propane, the two largest components of the NGL composite price, rose 28.5% and 12.6%, respectively. Butane, isobutene, and natural gasoline rose 9.0%, 8.3%, and 1.3%, respectively.

more summary data

Prices/Demand/Supply:

This week was the latest in a very cold month. Groundhog Day may not be until Sunday, but brutal cold, record high natural gas spot prices, and sky-high consumption are beginning to feel awfully familiar. According to Bentek Energy's daily consumption history, which started in 2005, the five highest values of total natural gas consumption all occurred in January 2014, and two of those days came during the current report week. Production freeze-offs have been common this month and this week, with trade press noting instances of freeze-offs this week in many areas of the country, including the Marcellus, Utica, and Fayetteville shales and in the Midcontinent and Rockies regions.

Henry Hub surpassed $5/MMBtu. Ice and below-freezing temperatures in the Gulf Coast pushed natural gas prices in the region to levels not seen in nearly four years. Henry Hub spot prices began the report week at $4.91/MMBtu last Wednesday, then spiked Monday to $5.69/MMBtu, their highest level since February 2010. Prices then fell and ended the report week at $5.20/MMBtu. While spot prices fell as cold weather abated, the February 2014 Nymex appeared to ignore spot market fundamentals and continued to rise, expiring yesterday at $5.557/MMBtu.

Prices spiked in the Midwest. Spot prices at the Chicago Citygate, which are normally very close to the Henry Hub price, remained elevated all week. The price hit $41.96/MMBtu on Monday, far surpassing the previous record high of $18.49/MMBtu, set in February 1996. Cold weather and pipeline constraints drove the price increase. A segment on TransCanada's Emerson Lateral in Manitoba caught fire early Saturday morning and the pipeline incident cut flows to the Emerson trading point, which lies on the border between Manitoba and Minnesota and feeds Viking Gas Transmission's system. Viking declared force majeure, which frees both parties to a contract from upholding obligations in the event of extraordinary circumstances. In addition, the extreme cold led Nicor Gas, which serves end-use customers and also operates transmission and storage facilities in the area, to declare a critical day on Saturday to prevent system imbalances. During the critical day, customers were limited to storage withdrawals based on contracted quantities, and lower-priced interruptible withdrawal service was not available. Nicor lifted the critical day declaration on January 29. By then, temperatures had warmed slightly and Chicago Citygate prices fell to the mid-$6/MMBtu range.

The Northeast was also cold. Transcontinental Pipeline (Transco), a major interstate pipeline running from the Gulf Coast to Pennsylvania and New York, declared a system wide operational flow order on Monday in order to manage system imbalances and handle intraday volatility. At Transco's Zone 6 trading point serving New York City customers, prices rose above $90/MMBtu on Monday before dropping back to $27.86/MMBtu the following day and to $14.26/MMBtu yesterday. Similarly, prices at Boston trading locations reached into $70/MMBtu range Monday before retreating. Double-digit prices were common at Northeast trading points through the report week, with the highest prices occurring on Monday. Yesterday, prices at the major northeastern trading points were all less than $15/MMBtu.

Supply increased slightly, demand soared. A 0.5% decline in dry production over the Wednesday-Wednesday report week, largely attributable to the freeze-offs, was offset by an 18.4% increase in U.S. natural gas imports from Canada, according to Bentek. LNG sendout also increased, particularly from the Everett terminal in Boston and the Elba Island terminal near Savannah, Georgia. Total consumption rose 17.6% this week, as increased heating demand was reflected in a 23.4% week-on-week increase in residential and commercial consumption, and a 17.6% increase in power burn. Industrial consumption rose by 4.1%.

NGL prices were up. The Mont Belvieu, Texas, natural gas liquids composite price rose to $12.56/MMBtu. Increases in the propane and ethane prices at Mont Belvieu drove this change. Bentek Energy noted that the increase in ethane prices was likely the result of a rise in the natural gas price, as well as propane-to-ethane switching in the industrial sector (industrial consumers using ethane as a feedstock because it is cheaper than propane). While propane prices rose at Mont Belvieu, increases at Conway, Kansas (the other major NGL trading hub) have been much more dramatic. Cold weather demand for propane from residential and commercial consumers have driven prices up at both locations. However, additional factors, such as increased propane demand for crop drying, and reduced ethane and propane deliveries from Canada on the Cochin Pipeline, led to low storage levels at Conway, making the weather-driven prices spikes there especially severe.

Nymex rose to a 4-year high. The price of the natural gas near-month futures contract (February 2014) rose from $4.689/MMBtu last Wednesday to $5.557/MMBtu yesterday, when the February contract expired. This week's rise in futures prices was mostly concentrated in the next few months, and the February and March contracts ended yesterday at roughly $1/MMBtu greater than the contracts for April through October. On Wednesday, the February and March 2014 contracts rose by 87 and 92 cents, respectively. The April contract rose by 29 cents/MMBtu, and the rest of the strip only rose by between 17 and 21 cents/MMBtu. The 12-month strip (the average of the 12 contracts between February 2014 and January 2015) rose from $4.369/MMBtu to $4.684/MMBtu yesterday. The importance of the 87-cent rise in the February contract price to $5.557 is that the higher futures settlement price yesterday raises many prices in physical bidweek trading, which sets the price not for one day but for the entire next month, which in this case is February. Many trading hubs in the eastern half of the United States set the next-month price by adding a transportation price to the settled Nymex futures price.

more price data

Storage

Gas storage saw a larger-than-average net withdrawal. The net withdrawal reported for the week ending January 24 was 230 Bcf, 68 Bcf larger than the 5-year average of 162 Bcf and 39 Bcf larger than last year's net withdrawal of 191 Bcf. Current inventories totaling 2,193 Bcf are 637 Bcf (22.5%) less than last year at this time, 437 Bcf (16.6%) below the 5-year (2009-13) average and 153 Bcf (6.5%) below the 5-year minimum.

Storage draw just below market expectations of 234 Bcf. When the EIA storage report was released, the price for the February natural gas futures contract fell a few pennies on the New York Mercantile Exchange. At 10:30 a.m., the price of the near-month (February 2014) contract fell to $5.13/MMBtu. Prices rose to $5.19 in the hour following the release.

Net withdrawals in all three regions larger than average. The East, West, and Producing regions had net withdrawals of 124 Bcf, 22 Bcf, and 84 Bcf, respectively. All three gas storage regions remain below their year-ago and 5-year average levels. The East and the West regions remain below their 5-year minimums.

Temperatures during the storage report week cooler than normal. Temperatures in the Lower 48 states averaged 31.4 degrees for the week, 1.7 degrees cooler than the 30-year normal temperature and 2.7 degrees cooler than during the same period last year.

more storage data

See also:



Natural gas spot prices
Spot Prices ($/MMBtu)
Thu,
23-Jan
Fri,
24-Jan
Mon,
27-Jan
Tue,
28-Jan
Wed,
29-Jan
Henry Hub
5.54
5.19
5.69
5.23
5.20
New York
48.80
56.06
90.34
27.86
14.26
Chicago
6.53
10.68
41.96
6.56
6.43
Cal. Comp. Avg,*
4.97
4.88
5.00
4.94
5.16
Futures ($/MMBtu)
February Contract
4.730
5.182
4.847
5.033
5.557
March Contract
4.579
4.998
4.674
4.941
5.465
*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: (1/22/14 - 1/29/14)
Percent change for week compared with:
 
last year
last week
Gross Production
1.30%
-1.60%
Dry Production
1.29%
-1.58%
Canadian Imports
31.98%
18.38%
      West (Net)
32.66%
9.18%
      MidWest (Net)
62.96%
27.75%
      Northeast (Net)
2.19%
25.66%
LNG Imports
-3.35%
72.40%
Total Supply
3.69%
0.50%
Source: BENTEK Energy LLC
U.S. Consumption - Gas Week: (1/22/14 - 1/29/14)
Percent change for week compared with:
 
last year
last week
U.S. Consumption
24.8%
17.7%
Power
29.4%
17.6%
Industrial
4.5%
4.1%
Residential/Commercial
32.0%
23.4%
Total Demand
24.2%
17.6%
Source: BENTEK Energy LLC
Natural gas supply


Weekly natural gas rig count and average Henry Hub
Rigs
Fri, January 24, 2014
Change from
 
last week
last year
Oil Rigs
1,416
0.57%
7.68%
Natural Gas Rigs
356
-2.47%
-17.97%
Miscellaneous
5
25.00%
25.00%
Rig Numbers by Type
Fri, January 24, 2014
Change from
 
last week
last year
Vertical
396
2.86%
-11.01%
Horizontal
1,170
-0.26%
3.82%
Directional
211
-3.65%
16.57%
Source: Baker Hughes Inc.


Working Gas in Underground Storage
Stocks
billion cubic feet (bcf)
Region
2014-01-24
2014-01-17
change
East
1,063
1,187
-124
West
327
349
-22
Producing
803
887
-84
Total
2,193
2,423
-230
Source: U.S. Energy Information Administration
Working Gas in Underground Storage
Historical Comparisons
Year ago
(1/24/13)
5-year average
(2009-2013)
Region
Stocks (Bcf)
% change
Stocks (Bcf)
% change
East
1,409
-24.6
1,332
-20.2
West
401
-18.5
374
-12.6
Producing
1,020
-22.1
924
-13.1
Total
2,830
-22.8
2,630
-16.6
Source: U.S. Energy Information Administration


Temperature -- Heating & Cooling Degree Days (week ending Jan 23)
 
HDD deviation from:
 
CDD deviation from:
Region
HDD Current
normal
last year
CDD Current
normal
last year
New England
282
7
15
0
0
0
Middle Atlantic
299
36
37
0
0
0
E N Central
348
51
42
0
0
0
W N Central
325
10
20
0
0
0
South Atlantic
214
31
42
0
-8
-5
E S Central
226
38
37
0
-2
0
W S Central
129
-10
15
0
-4
0
Mountain
194
-37
-27
0
0
0
Pacific
64
-55
-28
0
-1
0
United States
235
10
18
0
-2
-1
Note: HDD = heating degree-day; CDD = cooling degree-day

Source: National Oceanic and Atmospheric Administration

Average temperature (°F)

7-Day Mean ending Jan 23, 2014

Mean Temperature (F) 7-Day Mean ending Jan 23, 2014

Source: NOAA/National Weather Service

Deviation between average and normal (°F)

7-Day Mean ending Jan 23, 2014

Mean Temperature Anomaly (F) 7-Day Mean ending Jan 23, 2014

Source: NOAA/National Weather Service