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Natural Gas Weekly Update

for week ending August 12, 2015   |  Release date:  August 13, 2015   |  Next release:  August 20 , 2015   |   Previous weeks

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

In the News:

Texas power burn hits record highs

Consumption of natural gas for power generation (power burn) in Texas is at a record high, according to data from Bentek Energy. Daily consumption in 2015, through August 11, has averaged 4.5 billion cubic feet per day (Bcf/d). The next-highest level was 4.4 Bcf/d, for the same period in 2012. Over the whole year in 2012, generation averaged 4.2 Bcf/d. Because of its large population, hot summer weather, and large amount of natural gas capacity , Texas consumes more gas for power generation than any other state in the country. In 2014, for example, Texas consumed 3.9 Bcf/d of natural gas for power generation (18% of total U.S. power generation), according to EIA data. Florida was a distant second, at 2.9 Bcf/d.

The reason for high power generation this summer is largely because of hot weather in the state. Average daily temperatures in most of the state this month were close to 90°, according to data from the National Oceanic and Atmospheric Administration. Daily highs earlier this week were greater than 100°.

The Electricity Reliability Council of Texas (ERCOT), which manages most of Texas's electric grid, reported that hourly peak demand had exceeded 69,000 MW for the first time on August 10, between 3 p.m. and 4 p.m. and again between 4p.m. and 5 p.m. ERCOT officials said they expected continued high demand through the end of the week, when temperatures are expected to ease. ERCOT also reported hourly demand records in July because of heat, and asked customers to conserve power as a precaution to ensure grid reliability. Hot temperatures and high demand have led to spikes in day-ahead power prices in Texas.

Earlier this year, ERCOT issued a pre-summer reliability assessment projecting relatively high reserve margins (the amount of unused available capability of an electric power system as a percentage of total capacity) for the summer of 2015, both because of projections for a mild summer and the availability of additional generation capacity. While the summer in Texas has not been mild, additional natural gas and wind electric generation capacity has come online this year. In May, Panda Power Funds brought online a 717-MW gas-fired facility in Temple, Texas. Additionally, ERCOT reported that an additional 152 MW of summer peak average capacity of wind generation would come online during the season.

Overview:

(For the Week Ending Wednesday, August 12, 2015)

  • Natural gas prices fluctuated by less than 5% at most market locations during the report week (Wednesday, August 5, through Wednesday, August 12) with many points ending the report week near their starting price. The Henry Hub spot price started the week at $2.86 per million British thermal units (MMBtu), dropped 10¢ on Thursday, but then rose slowly through the week to close at $2.91/MMBtu yesterday.
  • At the New York Mercantile Exchange (Nymex) the September contract started the report week at $2.798/MMBtu last Wednesday and rose to $2.931/MMBtu yesterday.
  • Working natural gas in storage increased to 2,977 Bcf as of Friday, August 7. A net injection into storage of 65 Bcf for the week resulted in storage levels 21% above a year ago and 3% above the five-year average for this week.
  • The total U.S. oil and gas rotary rig count rose by 10 units to 884 for the week ending Friday, August 7, according to data from Baker Hughes Incorporated. The oil rig count increased by 6 units to 670, and the natural gas rig count increased by 4 to 213 units. Total rigs are currently 1,024 units below their year-ago levels.
  • The natural gas plant liquids composite price at Mont Belvieu, Texas, fell by 19¢ to $4.41/MMBtu for the week ending August 7. While the price of ethane rose 0.5%, all of the other components of the composite price fell. Natural gasoline and butane each fell by 6%, and propane and isobutene fell by 5%.

more summary data

Prices/Demand/Supply:

Price changes are small. Spot prices rose at most trading locations by 5% or less, and prices at most locations remained below the Henry Hub. The report week started out with above-average temperatures in in the southern half of the country. While temperatures began to moderate in most locations by Friday, temperatures in Texas remained above average for the entire period, though the high temperatures seen in Texas do not appear to have influenced regional prices significantly. The Henry Hub spot price rose from $2.86/MMBtu last Wednesday to close at $2.91/MMBtu yesterday, after dropping to a weekly low of $2.76/MMBtu on Thursday.

Prices at the Chicago Citygate were above Henry Hub, starting the report week at $2.94/MMBtu and closing yesterday at $2.98. A force majeure on Canada's Alliance Pipeline, which runs from western Canada to Chicago, had limited effect on Chicago prices because of the availability of alternate supplies. Natural gas containing poisonous hydrogen sulfide was mistakenly injected into the Alliance Pipeline, which resulted in the shut-in of all flows at the end of last week. The closure limited flows to the Vector Pipeline in the Great Lakes area, which reduced natural gas exports to eastern Canada from the United States through St. Clair by 0.5 Bcf/d, according to Bentek Energy. Price at the St. Clair Hub in Michigan, the pricing point for internationally traded gas between the United States and Canada, started the week last Wednesday at $2.99/MMBtu and closed at $3.06/MMBtu yesterday. Alliance returned to service today, August 13.

Northeast prices increase moderately through the week. With mild temperatures, northeastern spot prices began the report period lower than most. Many key trading points started the week at $1.75/MMBtu or less, then rose through the week by up to 60% as temperatures warmed. At the Algonquin Citygate, which serves Boston, the spot price started the report period at $1.43/MMBtu, then rose to close at $2.38/MMBtu yesterday. Similarly, at Transcontinental Pipeline's Zone 6 trading point, which serves New York City, prices began at $1.75/MMBtu last Wednesday, rising to $2.74/MMBtu yesterday. And in the Mid-Atlantic, at Texas Eastern M3, prices started last Wednesday at $1.37/MMBtu and rose to end the report period at $1.67/MMBtu yesterday.

Marcellus prices rise, but remain low. Marcellus-area prices, among the lowest in the country, rose this week. At Tennessee Pipeline's Zone 4 Marcellus trading area, prices rose 10%, from $1.16/MMBtu to $1.28/MMBtu Wednesday to Wednesday. At Transco's Leidy Line, prices also rose, though slightly, from $1.26/MMBtu to $1.28/MMBtu. Dominion South demonstrated more upward growth than other Marcellus trading points by rising 23%. Prices rose from last Wednesday's starting price of $1.27/MMBtu to close yesterday at $1.56/MMBtu.

Nymex prices rise. The price for the September futures contract started this past Wednesday at $2.798/MMBtu, then rose through the report week to settle at $2.931/MMBtu yesterday. The 12-month strip (the average of the 12 contracts between September 2015 and August 2016) rose from $3.001/MMBtu last Wednesday to $3.104/MMBtu yesterday.

Supply falls slightly. Total supply fell 2% week over week, but was up 4% over the same period last year. Dry natural gas production averaged 72 Bcf/d, down by 0.4% from last week, even though Northeast production recorded an all-time high of 20 Bcf/d on August 6, according to Bentek Energy. Production during the report week was up year-over-year by 4%. The Northeastern region of the United States was a net exporter of natural gas to Canada for this reporting period. U.S. imports of Canadian gas decreased in all regions, with week-over-week imports from Canada down 16.8%. LNG sendout was down 4.6% over last week, and remains a minor contributor to supply.

Consumption drops moderately. U.S. consumption fell by 3% overall, compared to the last report week. The industrial sector gained 0.4% for the week, while the power and residential/commercial sectors declined by 5% and 2%, respectively. Power burn, which started the week at 33.4 Bcf/d, dropped to stay below 33 Bcf/d from Friday to Sunday, and then rose to 34.1 Bcf/d on Monday, the report week's high. Overall, power burn was down 5% week-over-week, with only the Southeast remaining above the previous week, by 1%. U.S. natural gas exports to Mexico were up 19% over the same period in 2014, though down 6% from last week.

more price data

Storage

Net storage injection is higher than five-year average, but lower than last year's build. The net injection reported for the week ending August 7 was 65 Bcf, up from 32 Bcf the previous week. This compares with the five-year average increase of 48 Bcf for the week and last year's increase of 79 Bcf. Working gas inventories for the storage week totaled 2,977 Bcf, 521 Bcf (21%) higher than last year at this time and 81 Bcf (3%) higher than the five-year (2010-14) average.

Storage injections are higher than market expectations. Market expectations, on average, called for a build of 56 Bcf. When the EIA storage report was released at 10:30 a.m. on August 13, the price for the September natural gas futures contract fell by about 7¢ to around $2.85/MMBtu in Nymex futures trading.

From the week ending April 3 (the beginning of the injection season) through the week ending August 7, net storage injections totaled 1,516 Bcf, or 107 Bcf less than the 1,623 Bcf injected during the same 19 weeks in 2014. During these weeks for the years 2010-14, net injections into storage averaged 1,245 Bcf. The estimated average unit value of the natural gas storage holders put into storage from April 3 to August 7 this year is $2.77/MMBtu, 37% lower than the average value of $4.43/MMBtu for the same 19 weeks last year. The highest winter-month Nymex price (for the January 2016 contract) in trading for the week ending August 7 averaged $3.18/MMBtu. This price is 38¢/MMBtu more than the August Nymex contract price. A year ago, the difference was also 38¢/MMBtu, suggesting there is the same financial incentive this year to buy and store natural gas in the summer for sale in the winter.

In the Short-Term Energy Outlook (STEO) released on August 11, EIA forecasts that end-of-October inventories will reach 3,867 Bcf, 62 Bcf (1.6%) more than the five-year average for that time. This month's forecast is also 52 Bcf smaller than the end-of-October inventory that EIA forecast in the July STEO forecast, a change based on lower-than-anticipated injection levels during July. There are currently 12 more weeks in the injection season, which traditionally runs from April 1 through October 31, although in many years injections continue into November. In order to reach 3,867 Bcf, injections need to average 74 Bcf per week through the end of October. EIA's forecast for the end-of-October inventory level is above the five-year (2010-14) average peak storage value of 3,805 Bcf. To reach the five-year average peak value, average weekly injections through the end of October would need to be 69 Bcf.

Temperatures during the storage report week were warmer than normal. Temperatures in the Lower 48 states averaged 76° for the storage report week, 1° warmer than the 30-year normal temperature and 2° warmer than the average temperature during the same week last year. There were 78 population-weighted cooling degree days (CDD) this report week, 3 CDD fewer than the five-year average and 14 CDD more than during this week last year.

more storage data

See also:



Natural gas spot prices
Spot Prices ($/MMBtu)
Thu,
06-Aug
Fri,
07-Aug
Mon,
10-Aug
Tue,
11-Aug
Wed,
12-Aug
Henry Hub
2.76
2.80
2.85
2.84
2.91
New York
1.43
1.49
2.49
2.70
2.74
Chicago
2.84
2.89
2.92
2.91
2.98
Cal. Comp. Avg,*
2.94
2.94
3.00
2.99
3.05
Futures ($/MMBtu)
September contract
2.813
2.798
2.842
2.844
2.931
October contract
2.835
2.822
2.868
2.871
2.956
*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: (8/5/15 - 8/12/15)
Percent change for week compared with:
 
last year
last week
Gross production
4.01%
-0.36%
Dry production
3.97%
-0.36%
Canadian imports
-5.35%
-16.83%
      West (net)
21.89%
-2.92%
      Midwest (net)
-26.02%
-21.24%
      Northeast (net)
41.03%
-1250.28%
LNG imports
185.89%
-4.61%
Total supply
3.59%
-1.58%
Source: BENTEK Energy LLC
U.S. consumption - Gas Week: (8/5/15 - 8/12/15)
Percent change for week compared with:
 
last year
last week
U.S. consumption
6.1%
-3.1%
Power
15.9%
-5.4%
Industrial
-1.6%
0.4%
Residential/commercial
-5.0%
-2.3%
Total demand
6.6%
-3.3%
Source: BENTEK Energy LLC
Natural gas supply


Weekly natural gas rig count and average Henry Hub
Rigs
Fri, August 07, 2015
Change from
 
last week
last year
Oil rigs
670
0.90%
-57.81%
Natural gas rigs
213
1.91%
-32.59%
Miscellaneous
1
0.00%
-75.00%
Rig numbers by type
Fri, August 07, 2015
Change from
 
last week
last year
Vertical
129
2.38%
-65.87%
Horizontal
672
1.20%
-48.97%
Directional
83
-1.19%
-61.03%
Source: Baker Hughes Inc.


Working gas in underground storage
Stocks
billion cubic feet (bcf)
Region
2015-08-07
2015-07-31
change
East
1,407
1,354
53
West
471
466
5
Producing
1,099
1,092
7
Total
2,977
2,912
65
Source: U.S. Energy Information Administration
Working gas in underground storage
Historical comparisons
Year ago
(8/7/14)
5-year average
(2010-2014)
Region
Stocks (Bcf)
% change
Stocks (Bcf)
% change
East
1,269
10.9
1,468
-4.2
West
396
18.9
454
3.7
Producing
791
38.9
975
12.7
Total
2,456
21.2
2,896
2.8
Source: U.S. Energy Information Administration


Temperature -- heating & cooling degree days (week ending Aug 06)
 
HDD deviation from:
 
CDD deviation from:
Region
HDD Current
normal
last year
CDD Current
normal
last year
New England
1
-2
-1
51
7
18
Middle Atlantic
1
-2
-1
59
1
14
E N Central
2
-2
0
45
-11
8
W N Central
1
-1
-1
61
-8
7
South Atlantic
0
0
0
103
7
22
E S Central
0
0
0
95
1
22
W S Central
0
0
0
137
12
34
Mountain
0
-2
-1
85
10
13
Pacific
0
-2
0
65
18
-3
United States
1
-1
0
78
5
14
Note: HDD = heating degree-day; CDD = cooling degree-day

Source: National Oceanic and Atmospheric Administration

Average temperature (°F)

7-Day Mean ending Aug 06, 2015

Mean Temperature (F) 7-Day Mean ending Aug 06, 2015

Source: NOAA/National Weather Service

Deviation between average and normal (°F)

7-Day Mean ending Aug 06, 2015

Mean Temperature Anomaly (F) 7-Day Mean ending Aug 06, 2015

Source: NOAA/National Weather Service