Natural Gas

Overview:

(For the Week Ending Wednesday, June 5, 2013)

• Natural gas prices declined across all regional hubs this week (Wednesday to Wednesday). The Henry Hub closed at $3.99 per MMBtu yesterday, down 16 cents, or 3.9%, for the week.
• At the Nymex, the June 2013 contract closed at $4.148 per MMBtu on Wednesday, May 29, its final day of trading. The near-month (July) Nymex contract finished trading yesterday at $4.001 per MMBtu, 2.2 cents, or 0.5%, below its first day as the near-month contract on May 30, and 1.1 cents per MMBtu above the Henry Hub spot price.
• Working natural gas in storage increased to 2,252 Bcf as of Friday, May 31, according to the U.S. Energy Information Administration's (EIA) Weekly Natural Gas Storage Report (WNGSR). A net storage injection of 111 Bcf for the week resulted in storage levels of 616 Bcf below year-ago levels, and 69 Bcf below the 5-year average.
• The Baker Hughes natural gas rotary rig count totaled 354 units as of Friday, May 31, the same total as the preceding two weeks. The average oil rig count rose by 8 units to 1,410, following two weeks of declines.
• The weekly average natural gas plant liquid composite price for last week (Tuesday, May 28 – Friday, May 31) decreased by 2%, falling $0.17 per MMBtu over the previous week to $9.07 per MMBtu. The ethane and propane spot prices fell by 4% and 2%, respectively, driving the decrease in the composite price.

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Prices/Demand/Supply:

Natural gas spot prices declined this week. The Henry Hub spot price began the report week on Wednesday, May 29 at $4.15 per MMBtu, and declined to $3.99 per MMBtu on Wednesday, June 5, amid cooler than normal temperatures for most of the country. Most other major trading hubs also saw prices decline by 10-20 cents per MMBtu for the report week.

Significant price fluctuations occurred in New England during the report week. For the week as a whole, prices at Algonquin Citygate, which serves Boston, fell by $1.70 per MMBtu, after starting the report week on Wednesday, May 29, at $5.79 per MMBtu. Amid reports of warmer weather during the weekend, prices increased to $6.67 per MMBtu by Friday, May 31. However, cooler temperatures took hold by Monday, and prices declined by $2.00 per MMBtu on Monday, June 3, and then an additional 58 cents by Wednesday, June 5, closing at $4.09 per MMBtu.

The Nymex futures price decreased week-on-week. The Nymex June contract price closed at $4.148 per MMBtu on Wednesday, May 29, its final day of trading. On Thursday, May 30, the Nymex July contract took over as the front-month contract, and closed at $4.023 per MMBtu. On Friday, May 31, it traded down to $3.984 per MMBtu, and closed on Wednesday, June 5, at $4.001 per MMBtu. The 12-month strip (the average of July 2013 to June 2014 contracts) closed the report week at $4.135 per MMBtu, down 2.2 cents, or 0.5%, from its closing price on Thursday, May 30.

Total demand increased week-on-week, but decreased during the report week. According to Bentek Energy Services LLC estimates, overall natural gas consumption in the United States increased by 3.5%, or 1.9 Bcf/d, over last week's daily average. This increase was the result of large amounts of natural gas consumed for electric generation at the beginning of the report week on Thursday, May 30, and Friday, May 31. Increases during these two days drove the entire week's increase in the amount of natural gas consumed for electric generation, which grew 4.8 Bcf/d (25%) over last week's daily average. Natural gas consumed for electric generation in the Northeast was the largest regional contributor to the bump up in natural gas power generation demand Thursday and Friday, during a period of warm weather that prompted increased air-conditioning load.

Total supply for the report week was up slightly. Bentek estimated that supply was up slightly for the report period. U.S. gross and dry natural gas production both declined by 0.2% week-on-week, following last week's 0.5% increase. However, this 0.1 Bcf/d gross production decline was less than the 0.9 Bcf/d combined rise in LNG imports and net pipeline imports from Canada. Net pipeline imports from Canada were up 16.2%; increased imports from Canada in the West offset a decline in Northeast imports. LNG imports continued to account for less than 1% of total U.S. supply.

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Storage

This week's net injection of 111 Bcf is the highest weekly net injection since October 2011. Working natural gas in storage increased to 2,252 Bcf as of Friday, May 31, according to EIA's WNGSR. The net injection was considerably higher than market expectations, which, on average, were reported to be 99 Bcf.

The 111 Bcf gain in storage levels was higher than both the 5-year average and year-ago stock changes for the week, which had net injections of 92 Bcf and 63 Bcf, respectively. Despite the large build, current inventories remain 616 Bcf (21.5 percent) less than last year at this time and 69 Bcf (3.0 percent) below the 5-year average of 2,321 Bcf.

All three storage regions posted increases this week. Inventories in the East, West, and Producing regions increased by 58 Bcf (the 5-year average net injection is 54 Bcf), 16 Bcf (the 5-year average net injection is 16 Bcf), and 37 Bcf (the 5-year average net injection is 22 Bcf), respectively. In the Producing region, working natural gas inventories increased 11 Bcf (4.5 percent) in salt cavern facilities and increased 26 Bcf (4.3 percent) in nonsalt cavern facilities.

Cooler spring temperatures during the storage report week supported this week's net injection. Temperatures in the Lower 48 states were 1.1 degrees cooler than the 30-year normal temperature and 6.1 degrees cooler than the same period last year, and averaged 64.6 degrees, compared to 70.7 degrees last year and the 30-year normal of 65.7 degrees.

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See also:

• Natural Gas Analysis Reports
• Short-Term Energy Outlook