Natural Gas

Overview:

(For the Week Ending Wednesday, August 21, 2013)

• Natural gas hub prices increased in most areas during the report week (Wednesday, August 14, to Wednesday, August 21). The Henry Hub spot price closed yesterday at $3.51 per million British thermal unit (MMBtu), up 15 cents from $3.36 the previous week.
• At the Nymex, futures prices also increased over the week. The near-month contract (September 2013) rose from $3.342 per MMBtu to $3.460 per MMBtu yesterday.
• Working natural gas in storage increased to 3,063 Bcf as of Friday, August 16, according to the U.S. Energy Information Administration's (EIA) Weekly Natural Gas Storage Report (WNGSR). A net storage injection of 57 Bcf for the week resulted in storage levels of 238 Bcf below year-ago levels, and 44 Bcf above the 5-year average.
• The Baker Hughes natural gas rotary rig count totaled 388 active units as of Friday, August 16, an increase of 2 rigs from the previous week. The oil rig count increased by 12 to 1,397.
• The weekly average natural gas plant liquids composite price rose this week (covering August 12 through 16) compared to last week by 3%, and is now at $9.99 per MMBtu. Most natural gas plant liquids prices increased by around 2%, with the exception of propane, which posted a noticeable gain of 6% to $11.45 per MMBtu, and ethane, which fell by 2% to $3.29 per MMBtu.

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Prices/Demand/Supply:

Natural gas prices rose over the report week at most locations, likely in response to warmer weather. Average temperatures increased in most parts of the country over the report week, particularly in the West. On Monday, average temperatures were 4-10 degrees Fahrenheit above normal in the western half of the United States, while average temperatures were 2-4 degrees below normal in the East. By Tuesday, temperatures in the east increased to normal levels, with average temperatures in the mid- to high-70s. With the outlook of warmer, more seasonal weather moving eastward, natural gas spot prices increased noticeably during trading on Monday, when average prices rose between 10 cents and 69 cents per MMBtu at major trading hubs. The increases were particularly large in the Northeast. During the report week, the price at the Algonquin Citygate, which serves Boston, rose 51 cents per MMBtu to $3.92.

Since Monday, Southern California and Arizona have been experiencing the warmest weather in the United States, with average temperatures in the 90s. This weather likely contributed to the increases in natural gas consumption for power generation in the Southwest. As a result, the price at SoCal Citygate, which serves Southern California, increased by 21 cents per MMBtu to $3.76 for the report week.

At the Nymex, the price of the September 2013 contract increased slightly. The price of the September 2013 contract rose from $3.342 per MMBtu last Wednesday to $3.460 yesterday. The 12-month strip (the average of the 12 contracts between September 2013 and August 2014) increased from $3.647 per MMBtu last Wednesday to $3.771 yesterday.

Consumption in all sectors declined during the report week, according to Bentek estimates. Total consumption decreased by 4.5% from the previous week. For the week, the power sector fell most noticeably by 8.4%. Driven by low power burn during the first four days of the report week, total weekly power burn in the Northeast, Southeast, and Texas decreased by 8.5%, 19.3%, and 14.3%, respectively, likely in response to cooler temperatures in these regions from the previous week. Power burn in the Rockies and the Southwest increased by 9.3% and 17.1%, respectively, because of warmer temperatures.

Supply decreased slightly during the report week. Total supply decreased by 0.2%, as domestic production and imports fell. Dry gas production, Canadian imports, and LNG imports decreased by 0.1%, 1.9%, and 4.8%, respectively.

Working natural gas in storage increased to 3,063 Bcf as of Friday, August 16, according to the U.S. Energy Information Administration's (EIA) Weekly Natural Gas Storage Report (WNGSR). A net storage injection of 57 Bcf for the week resulted in storage levels 7.4% below year-ago levels and 1.5% above the 5-year average.

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Storage

Working natural gas in storage increased to 3,063 Bcf as of Friday, August 16, according to EIA's WNGSR.The 57-Bcf gain in storage levels was significantly higher than the 47-Bcf injection that occurred during the same week in 2012, but was in line with the 5-year average increase of 56 Bcf. Current inventories are 245 Bcf (7.4%) less than last year at this time and 44 Bcf (1.5%) above the 5-year average of 3,019 Bcf.

The net injection was smaller than market expectations, which on average were reported to be around 68 Bcf. The lower-than-expected build contributed to natural gas prompt-month Nymex futures prices increasing by about 4 cents per MMBtu to just around $3.55 per MMBtu immediately following WNGSR's release. In the hour following the release, prices remained around that level.

With a lower than average build, the East region remains the only region below its 5-year average storage level. The East region was also the only region that had a stock build lower than the 5-year average with net injections in the East region growing by 47 Bcf, 4 Bcf lower than its 5-year average injections of 51 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 1.4 degrees cooler than the 30-year normal temperature and 2.9 degrees cooler than the same period last year, and averaged 73.0 degrees for the week, compared to the 30-year normal of 74.4 degrees and 75.9 degrees last year.

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See also:

• Natural Gas Analysis Reports
• Short-Term Energy Outlook