Natural Gas

Overview:

(For the Week Ending Wednesday, December 12, 2012)

• Natural gas prices registered overall decreases for the report week (Wednesday to Wednesday) at many of the country's trading locations. The Henry Hub price rose last Thursday to $3.48 per million British thermal units (MMBtu), but closed yesterday at $3.33 per MMBtu, down 8 cents per MMBtu for the week.
• Prices at the natural gas futures market continued to decrease – a decline which started at the end of November – trending lower throughout the week. At the New York Mercantile Exchange (NYMEX), the January 2012 natural gas contract lost 31.8 cents per MMBtu overall to close at $3.382 per MMBtu yesterday.
• Working natural gas in storage rose last week to 3,806 billion cubic feet (Bcf) as of Friday, December 7, according to the U.S. Energy Information Administration's (EIA) Weekly Natural Gas Storage Report (WNGSR). An implied storage build of 2 Bcf for the week positioned storage volumes 48 Bcf above year-ago levels.
• The natural gas rotary rig count, as reported by Baker Hughes Incorporated on December 7, decreased by 7 to 417 active units. Meanwhile, oil-directed rigs fell by 4 to 1,382 units.

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Prices:

The Henry Hub day-ahead price registered an overall decrease for the second consecutive report week, declining by 8 cents per MMBtu. Henry Hub climbed up 7 cents to $3.48 per MMBtu last Thursday, before falling by 15 cents per MMBtu last Friday to $3.33 per MMBtu. By this Tuesday, it had climbed back to $3.39 per MMBtu, before falling back to $3.33 per MMBtu at the close of trading on Wednesday, likely due to generally higher-than-average temperatures in many locations.

At the NYMEX, the January 2013 contract ended lower for the third consecutive report week, dropping by 31.8 cents, or 8.6 percent, from $3.700 per MMBtu last Wednesday to $3.382 per MMBtu yesterday. This was the largest decrease for the January 2013 contract recorded so far this winter. The price fell every day this week, and has decreased by a total of 52.1 cents per MMBtu since November 23. The 12-Month Strip (average of January 2013 to December 2013 contracts) closed yesterday at $3.561 per MMBtu, down 26.2 cents per MMBtu (6.9 percent) – also its third straight week of declines and its largest drop yet this winter.

Prices in the Northeast continued to fluctuate, with their overall spread above the Henry Hub day-ahead price decreasing for the week. For example, the day-ahead price at the Algonquin Citygate trading point (for delivery into Boston) registered a net decrease this week of $3.62 per MMBtu, or 38.4 percent, with its spread over Henry Hub falling by $3.54 per MMBtu or 58.8 percent amid reports of warmer weather. Algonquin Citygate spot prices started the report week at $9.43 per MMBtu, or $6.02 per MMBtu above the Henry Hub day-ahead price. Prices fell to $5.02 per MMBtu last Thursday, a spread of only $1.54 per MMBtu over Henry Hub. By Tuesday, prices had increased somewhat, reaching $6.84 per MMBtu or $3.45 per MMBtu over Henry Hub, before closing yesterday at $5.81 per MMBtu or $2.48 per MMBtu over Henry Hub. Prices at the Transcontinental Pipeline's Zone 6 trading point (serving New York City markets) also fluctuated above the Henry Hub day-ahead price, but to a much lesser degree, starting the week last Wednesday at $4.34 per MMBtu, or 93 cents per MMBtu over Henry Hub, before decreasing last Friday to $3.55 per MMBtu, or 22 cents per MMBtu over Henry Hub. They closed yesterday down for the week by 22 cents per MMBtu, having climbed back to $4.12 per MMBtu in yesterday's trading, or 79 cents per MMBtu over Henry Hub. Day-ahead prices at trading points in California, the Pacific Northwest, Rocky Mountains, and Midwest all decreased this week.

Total consumption for the report week reversed last week's decreases, returning to levels seen at the end of November. According to estimates from BENTEK Energy LLC (Bentek), domestic natural gas consumption rose by 14.5 percent from last week, driven by an increase of 28.7 percent in residential/commercial sector consumption. Power sector consumption rose by 7.0 percent, while industrial sector consumption finished the week up 2.0 percent.

Total supply decreased slightly for the report week, largely reflecting essentially flat dry natural gas production. According to Bentek estimates, domestic weekly dry natural gas production declined 0.7 percent from the previous week's volumes. Imports from Canada rose by 1.3 percent, due to increases of 6.3 percent in the Midwest and 8.8 percent in the Northeast, which more than compensated for a 6.1 percent decrease in imports to the West. Liquefied natural gas (LNG) sendout rose 34.6 percent over last week, but remains at relatively low historical levels.

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Storage

Working natural gas in storage increased to 3,806 Bcf as of Friday, December 7, according to EIA's WNGSR. This represents an implied net injection of 2 Bcf from the previous week. This is in contrast to the net withdrawals of 113 Bcf and 79 Bcf, respectively, for both the 5-year (2007-2011) average and last year for the same report week. Inventories are currently 48 Bcf (1.3 percent) greater than last year at this time and 283 Bcf (8.0 percent) greater than the 5-year average.

Two of the three storage regions posted increases this week. Inventories in the West and Producing regions increased by 2 Bcf (compared to the 5-year average net withdrawal of 14 Bcf) and 12 Bcf (compared to the 5-year average net withdrawal of 29 Bcf), respectively, while the East region posted a decline of 12 Bcf (the 5-year average net withdrawal of 70 Bcf). In the Producing region, working natural gas inventories increased 4 Bcf (1.3 percent) in salt cavern facilities and decreased 9 Bcf (0.9 percent) in nonsalt cavern facilities.

Temperatures during the storage report week were 9.3 degrees warmer than the 30-year normal temperature and 8.4 degrees warmer than the same period last year. Temperatures in the Lower 48 states averaged 49.3 degrees, compared to 40.9 degrees last year and the 30-year normal of 40.0 degrees. During the week all regions were warmer than normal, particularly the West North Central and the East North Central Census divisions in the Midwest, which, respectively, averaged 13.9 and 12.0 degrees warmer than the 30-year normal. The West South Central Census division in the South and the Mountain Census division in the West were particularly warm, averaging 12.7 and 11.1 degrees warmer, respectively, than the 30-year normal. Heating degree-days nationwide were 35.6 percent below normal and 32.9 percent below last year.

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See also:

• Natural Gas Analysis Reports
• Short-Term Energy Outlook