In the News:
Industrial natural gas consumption growth continues rising
Providing another sign of continued growth in industrial demand for natural gas, two European companies announced earlier this month that they would form a joint venture to build an ammonia plant on the Gulf Coast. BASF, a German chemicals company, and Yara, a Norwegian agricultural company, plan to build the plant on an existing BASF site in Freeport, Texas. The plant would have a capacity to produce 750,000 metric tons of ammonia per year and could use up to 77 million cubic feet per day (MMcf/d) of natural gas as a feedstock. BASF and Yara announced in October that they were planning an ammonia plant, and cited relatively low natural gas prices over the past several years as a reason for locating the plant in the United States.
After industrial natural gas consumption bottomed out in 2009 at 16.9 Bcf/d, it has been increasing at a moderate pace. The May 2014 Short-Term Energy Outlook projects that industrial consumption will increase through 2015 and the Annual Energy Outlook projects continued growth through 2040. Over the past few years, economic recovery, relatively low natural gas prices, and growth in domestic natural gas supply have created an environment conducive to natural gas-intensive manufacturing processes, including chemicals and fertilizer production. Ammonia (including ammonia-based fertilizer) and methanol plants use natural gas directly as a feedstock and are thus among the most natural gas-intensive industrial end users. Although natural gas prices have risen over the past several months, they are still relatively low compared to prices before 2009 in the United States and to current prices in Europe and Asia. As a result, several new ammonia-based fertilizer and methanol plants have come online in the past year, and more are scheduled to open in the coming years.
In February 2013, Potash Corp. restarted its ammonia plant in Geismar, Louisiana. The plant had been idle since 2003. Bentek Energy estimates the facility uses 184 million cubic feet per day (MMcf/d) of natural gas. In addition to several expansions and upgrades to existing ammonia plants, Bentek reports two other new ammonia-producing plants in the United States that will use more than 100 MMcf/d of natural gas. Iowa Fertilizer Company's plant in Wever, Iowa, and the Donaldsonville Nitrogen Complex, in Donaldsonville, Louisiana, are planned to begin operating at the end of 2015.
Overview:
(For the Week Ending Wednesday, May 21, 2014)
- Natural gas spot prices were flat to moderately increasing over the report period. The Henry Hub spot price rose by 16 cents per million British thermal units (MMBtu), moving from $4.41/MMBtu last Wednesday to $4.57 yesterday.
- At the New York Mercantile Exchange (Nymex), the June contract increased by more than 10 cents, beginning the report week at $4.367/MMBtu last Wednesday and settling at $4.473/MMBtu yesterday.
- Working natural gas in storage rose to 1,266 Bcf as of Friday, May 16, according to the U.S. Energy Information Administration (EIA) Weekly Natural Gas Storage Report (WNGSR). A net increase in storage of 106 billion cubic feet (Bcf) for the week resulted in storage levels 37.9% below year-ago levels and 42.7% below the 5-year average.
- Active oil and natural gas drilling rigs totaled 1,861 as of May 16, up by 6 rigs from the previous week, according to data from Baker Hughes Inc. The number of gas and oil-directed rigs each increased by 3 to 326 and 1,531, respectively. The oil rig count is currently 123 higher than this week last year, and the gas rig count is 28 lower.
- The weekly average natural gas plant liquids composite price decreased for the fourth week in a row (covering May 12 through May 16), falling 1.4% from $9.78/MMBtu to $9.64/MMBtu. The Mont Belvieu spot prices of ethane, propane, butane, and isobutane drove the decline, falling by between 1% and 4%. The natural gasoline spot price increased by 1.1%.
Prices/Demand/Supply:
Natural gas spot prices are flat to moderately increasing. Prices in the Rockies and to the west were flat over the week, while prices in the rest of the country rose moderately, generally by around 15 cents/MMBtu or less. The Henry Hub spot price increased by 16 cents/MMBtu, from $4.41/MMBtu last Wednesday to $4.57 yesterday.
In the Northeast, price movements were more diverse. The Algonquin Citygate price, delivering to Boston, fell by 44 cents/MMBtu, from $4.06/MMBtu to $3.62, while Transco Zone 6 delivering to New York City increased by 6 cents/MMBtu, from $3.21/MMBtu to $3.27. Spot prices at Leidy, which reflects the price of Marcellus natural gas, increased by 13 cents/MMBtu, from $2.36/MMBtu to $2.49. Most market points in the Northeast continue to trade at a significant discount to Henry Hub.
Nymex price increases. At the New York Mercantile Exchange (Nymex), the June contract increased, beginning the week at $4.367/MMBtu last Wednesday and settling at $4.473 yesterday. The 12-month strip (the average of the June 2014 through May 2015 contracts) similarly increased, moving from $4.424/MMBtu last Wednesday to $4.507 yesterday.
Natural gas supply decreases modestly. According to Bentek Energy data, overall supply decreased by 0.3% compared to last week. A small decrease in production (0.6%) was offset by an increase in imports from Canada (3.2%). Total imports from Canada were driven up largely on increased imports in the Midwest. In the Northeast, the United States exported small net volumes of gas to Canada over the report week.
Consumption declines. Bentek data show overall consumption falling by 0.7 Bcf/d (1.2%) versus last week's daily average, to 57.3 Bcf/d. Lower natural gas consumption from the power sector (power burn) more than offset increases in the industrial, residential, and commercial sectors.
Regions east of the Rockies experienced cooler temperatures this week compared with last week, with power burn down by between 7% and 21%. Meanwhile, warmer temperatures prevailed in the Rockies and to the west, with power burn increasing in the Rockies, Pacific Northwest, and the Southwest by between 1% and 10%. Total power burn fell by 2.6 Bcf/d (11.9%), to 19.1 Bcf/d.
Consumption in the residential and commercial sectors increased by 1.7 Bcf/d (10.7%), to 17.2 Bcf/d. Industrial consumption increased by 1.3% and exports to Mexico increased by 11.6%.
Storage
Net storage increase is in triple digits. The net injection reported for the week ending May 16 was 106 Bcf, 16 Bcf larger than both the 5-year average net injection of 90 Bcf and last year's net injection of 90 Bcf. Working gas inventories totaled 1,266 Bcf, 774 Bcf (37.9%) less than last year at this time, 943 Bcf (42.7%) below the 5-year (2009-13) average, and 698 Bcf (35.5%) below the 5-year observed minimum.
Storage build is larger than market expectations. Market expectations called for a build of 103 Bcf. When the EIA storage report was released at 10:30 a.m., the price for the June natural gas futures contract fell 4 cents to $4.38 /MMBtu on the Nymex. Prices continued trading around that level in the hour following the release.
From the week ending on April 4 to the week ending on May 16, net storage injections have totaled 444 Bcf, versus 340 Bcf for the same seven weeks in 2013, and 395 Bcf for these weeks between 2009 and 2013, on average. The average unit value of what storage holders put into storage from April 4 to May 16 was $4.66/MMBtu, 14% higher than the average value for the same seven weeks last year of $4.07/MMBtu. The highest winter month Nymex price in trading for the week ending on May 16 averaged $4.65/MMBtu. This was 20 cents more than the Nymex June contract price. For the same storage week last year, the difference between the maximum winter contract and the front-month contract was 33 cents/MMBtu.
There are currently 24 more weeks in the injection season, which traditionally occurs April 1 through October 31, although in many years injections continue into November. In order to reach EIA's forecasted end of October working natural gas inventory level of 3,405 Bcf, an average injection of 89 Bcf per week will need to occur through the end of October. EIA's forecast for the end of October inventory levels are below the 5-year (2009-13) minimum value of 3,792 Bcf. To reach the 5-year minimum, average weekly injections through the end of October would need to be 105 Bcf.
Two regions post larger-than-average builds. The East, West, and Producing regions had net injections of 65 Bcf (14 Bcf larger than its 5-year average injection), 12 Bcf (1 Bcf smaller than its 5-year average injection), and 29 Bcf (3 Bcf larger than its 5-year average injection), respectively. Storage levels for all three regions remain below their year-ago and 5-year average levels, and their 5-year minimums.
Temperatures during the storage report week warmer than normal. Temperatures in the Lower 48 states averaged 64.9 degrees for the week, 3.9 degrees warmer than the 30-year normal temperature and 3.1 degrees warmer than during the same period last year.
See also:
| Spot Prices ($/MMBtu) | Thu, 15-May |
Fri, 16-May |
Mon, 19-May |
Tue, 20-May |
Wed, 21-May |
|---|---|---|---|---|---|
| Henry Hub |
4.35 |
4.43 |
4.52 |
4.52 |
4.57 |
| New York |
3.13 |
2.98 |
3.19 |
3.24 |
3.27 |
| Chicago |
4.51 |
4.47 |
4.51 |
4.52 |
4.57 |
| Cal. Comp. Avg,* |
4.61 |
4.61 |
4.63 |
4.64 |
4.67 |
| Futures ($/MMBtu) | |||||
| June Contract |
4.469 |
4.413 |
4.470 |
4.552 |
4.473 |
| July Contract |
4.478 |
4.421 |
4.473 |
4.553 |
4.478 |
| *Avg. of NGI's reported prices for: Malin, PG&E citygate, and Southern California Border Avg. | |||||
| Source: NGI's Daily Gas Price Index | |||||
| U.S. Natural Gas Supply - Gas Week: (5/14/14 - 5/21/14) | ||
|---|---|---|
Percent change for week compared with: |
||
last year |
last week |
|
| Gross Production | 4.36%
|
-0.58%
|
| Dry Production | 4.31%
|
-0.58%
|
| Canadian Imports | 8.56%
|
3.21%
|
| West (Net) | -0.21%
|
-2.96%
|
| MidWest (Net) | 21.21%
|
11.89%
|
| Northeast (Net) | 183.50%
|
100.90%
|
| LNG Imports | -38.31%
|
-1.68%
|
| Total Supply | 4.48%
|
-0.32%
|
| Source: BENTEK Energy LLC | ||
| U.S. Consumption - Gas Week: (5/14/14 - 5/21/14) | ||
|---|---|---|
Percent change for week compared with: |
||
last year |
last week |
|
| U.S. Consumption | 2.7%
|
-1.2%
|
| Power | -15.5%
|
-11.9%
|
| Industrial | 3.0%
|
1.3%
|
| Residential/Commercial | 34.7%
|
10.7%
|
| Total Demand | 3.0%
|
-0.8%
|
| Source: BENTEK Energy LLC | ||
| Rigs | |||
|---|---|---|---|
Fri, May 16, 2014 |
Change from |
||
last week |
last year |
||
| Oil Rigs | 1,531 |
0.20% |
8.74% |
| Natural Gas Rigs | 326 |
0.93% |
-7.91% |
| Miscellaneous | 4 |
0.00% |
-42.86% |
| Rig Numbers by Type | |||
|---|---|---|---|
Fri, May 16, 2014 |
Change from |
||
last week |
last year |
||
| Vertical | 406 |
0.50% |
-12.12% |
| Horizontal | 1,248 |
0.40% |
13.87% |
| Directional | 207 |
-0.48% |
-1.90% |
| Source: Baker Hughes Inc. | |||
| Working Gas in Underground Storage | ||||
|---|---|---|---|---|
Stocks billion cubic feet (bcf) |
||||
| Region | 2014-05-16 |
2014-05-09 |
change |
|
| East | 522 |
457 |
65 |
|
| West | 231 |
219 |
12 |
|
| Producing | 513 |
484 |
29 |
|
| Total | 1,266 |
1,160 |
106 |
|
| Source: U.S. Energy Information Administration | ||||
| Working Gas in Underground Storage | |||||
|---|---|---|---|---|---|
Historical Comparisons |
|||||
Year ago (5/16/13) |
5-year average (2009-2013) |
||||
| Region | Stocks (Bcf) |
% change |
Stocks (Bcf) |
% change |
|
| East | 850 |
-38.6 |
971 |
-46.2 |
|
| West | 366 |
-36.9 |
346 |
-33.2 |
|
| Producing | 823 |
-37.7 |
892 |
-42.5 |
|
| Total | 2,040 |
-37.9 |
2,209 |
-42.7 |
|
| Source: U.S. Energy Information Administration | |||||
| Temperature -- Heating & Cooling Degree Days (week ending May 15) | ||||||||
|---|---|---|---|---|---|---|---|---|
HDD deviation from: |
CDD deviation from: |
|||||||
| Region | HDD Current |
normal |
last year |
CDD Current |
normal |
last year |
||
| New England | 36
|
-33
|
-29
|
3
|
3
|
3
|
||
| Middle Atlantic | 13
|
-43
|
-48
|
6
|
3
|
6
|
||
| E N Central | 35
|
-26
|
-37
|
15
|
6
|
10
|
||
| W N Central | 76
|
23
|
19
|
8
|
-2
|
-3
|
||
| South Atlantic | 2
|
-21
|
-28
|
65
|
30
|
32
|
||
| E S Central | 8
|
-13
|
-23
|
48
|
23
|
28
|
||
| W S Central | 15
|
10
|
8
|
51
|
1
|
14
|
||
| Mountain | 94
|
28
|
62
|
13
|
-4
|
-20
|
||
| Pacific | 18
|
-23
|
11
|
23
|
17
|
0
|
||
| United States | 30
|
-15
|
-12
|
29
|
12
|
10
|
||
|
Note: HDD = heating degree-day; CDD = cooling degree-day Source: National Oceanic and Atmospheric Administration | ||||||||
Average temperature (°F)
7-Day Mean ending May 15, 2014
Source: NOAA/National Weather Service
Deviation between average and normal (°F)
7-Day Mean ending May 15, 2014
Source: NOAA/National Weather Service
