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Natural Gas Weekly Update

for week ending August 16, 2017   |  Release date:  August 17, 2017   |  Next release:  August 24, 2017   |   Previous weeks


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

In the News:

Mexico deregulates natural gas prices; works on building price reporting system and market hubs

As part of its ongoing energy reform, the Mexican government converted to a liberalized natural gas market on July 1. As part of this effort, several government agencies are working concurrently to make market data more transparent by implementing electronic reporting systems. Mexico’s pipeline system operator (CENAGAS) has launched its natural gas capacity reservation system with electronic bulletin boards (EBBs) for posting gas flows, and the Energy Regulatory Commission (CRE) is developing a price reporting system. Greater price transparency is also part of the reform by establishing price indices at proposed market hubs.

The Secretaría de Energía (SENER) has identified four potential pricing hubs, located at the convergence of natural gas pipelines, where the most trading is likely to occur: Los Ramones (near the industry-intense city of Monterrey), Encino (in the northern state of Chihuahua), Bajío (near Mexico City), and Cactus (in the southern state of Chiapas). Spot transactions that have occurred at or near these locations could be used to calculate price indices.

Market hubs will provide a means for supply and demand balancing through the transparent reporting of market prices. As an initial step towards creating a free market and more price transparency, CRE abolished “first-hand” natural gas prices (known as Venta de Primera Mano or VPM) on June 16. VPM is the first sale of natural gas that Petróleos Mexicanos (PEMEX) makes to a third party for delivery in Mexican territory. Historically, the VPM calculation capped the price that PEMEX could charge based on a combination of the U.S. Henry Hub futures prices, published distribution plant prices at Reynosa, and transportation costs.

According to Natural Gas Intelligence, CRE will post the first daily transaction report as soon as marketers register spot sales. The price reporting system will capture data on day-ahead spot sales in the natural gas market. For each transaction, marketers must report the volume, price per gigajoule (GJ), storage and transportation costs, and several other variables, according to CRE-issued requirements. After 6:00 p.m. Central Time each day, CRE will compile the information submitted for the day and publish non-proprietary information in a public report on its website the following day. In addition to the daily information, CRE will require marketers to submit a monthly report on their sales.

Eliminating the VPM allows economic agents other than PEMEX to offer supply options and for natural gas to be sold in Mexico on a free-market basis, although the prices are not currently publicly reported. This shift also serves to increase Mexico’s domestic natural gas production. Since VPM’s elimination, Mexico has held three rounds of upstream auctions for oil and natural gas exploration in June and July, selling 79% of available auction blocks. Mexico plans to hold two more auctions in early 2018. The next auction includes 30 blocks favorably suited to producing natural gas.

Overview:

(For the Week Ending Wednesday, August 16, 2017)

  • Natural gas spot prices rose at most locations this report week (Wednesday, August 9 to Wednesday, August 16). The Henry Hub spot price rose from $2.85 per million British thermal units (MMBtu) last Wednesday to $2.89/MMBtu yesterday.
  • At the New York Mercantile Exchange (Nymex), the September 2017 contract price rose 1¢ from $2.883/MMBtu last Wednesday to $2.890/MMBtu yesterday.
  • Net injections to working gas totaled 53 billion cubic feet (Bcf) for the week ending August 11. Working natural gas stocks are 3,082 Bcf, which is 8% less than the year-ago level and 2% more than the five-year (2012–16) average for this week.
  • The natural gas plant liquids composite price at Mont Belvieu, Texas, rose by 16¢, averaging $6.95/MMBtu for the week ending August 16. The price of natural gasoline fell by 3%. The price of ethane, propane, butane, and isobutane rose by 4%, 3%, 3%, and 5%, respectively.
  • According to Baker Hughes, for the week ending Friday, August 11, the natural gas rig count decreased by 8 to 181. The number of oil-directed rigs rose by 3 to 768. The total rig count decreased by 5, and it now stands at 949.

more summary data

Prices/Supply/Demand:

Price movements mixed with temperatures. Average temperatures in most states were higher this report week than last week, but are still below historical weekly averages, according to daily data from NOAA. This report week (Wednesday, August 9 to Wednesday, August 16), the Henry Hub spot price rose from $2.85 per million British thermal units (MMBtu) last Wednesday to $2.89/MMBtu yesterday, as average temperatures across the continental United States began the week lower than normal and ended the week above normal.

In California, temperatures decreased below average in the second half of the report week. Prices at PG&E Citygate decreased slightly, beginning the week at $3.26/MMBtu and closing the week at $3.22/MMBtu. At SoCal Citygate, prices decreased more sharply, starting the week at $3.23/MMBtu and ending the week 47¢ lower than at the start of the week.

Northeast prices rise. At the Algonquin Citygate, which serves Boston-area consumers, prices went up 39¢ from $2.08/MMBtu last Wednesday to $2.47/MMBtu yesterday. Average temperatures in Massachusetts were varied throughout the week, ending the week higher and above average yesterday. At the Transcontinental Pipeline Zone 6 trading point for New York, prices increased 55¢ from $1.77/MMBtu last Wednesday to $2.32/MMBtu yesterday.

Tennessee Zone 4 Marcellus spot prices increased 15¢ from $1.62/MMBtu last Wednesday to $1.77/MMBtu yesterday. Prices at Dominion South in northwest Pennsylvania rose 20¢ from $1.59/MMBtu last Wednesday to $1.79/MMBtu yesterday. Prices at both hubs closed the report week more than $1/MMBtu lower than the Henry Hub price. Over the past several years, several Appalachian pipeline projects have increased takeaway capacity, and the discount to the Henry Hub spot price has generally decreased.

September contract price increases slightly. At the Nymex, the price of the September 2017 contract increased 1¢, from $2.883/MMBtu last Wednesday to $2.890/MMBtu yesterday. The price of the 12-month strip averaging September 2017 through August 2018 futures contracts remained the same Wednesday to Wednesday at $3.001/MMBtu.

Supply is mixed. According to data from PointLogic Energy, the average total supply of natural gas decreased by 1% compared with the previous week. Dry natural gas production remained constant week over week. Average net imports from Canada decreased by 7% from last week.

Overall demand remains flat. Total U.S. consumption of natural gas was unchanged from last week, averaging 59.9 Bcf/d, according to data from PointLogic Energy. Natural gas consumed for power generation climbed by 1% week over week. Industrial sector consumption decreased by 1% week over week. In the residential and commercial sectors, consumption declined by 4%. Natural gas exports to Mexico decreased 3%.

U.S. LNG exports decline week over week. Three vessels (combined LNG-carrying capacity of 11.4 Bcf) departed Sabine Pass last week (Thursday to Wednesday).

more price data

Storage:

Weekly net injections top five-year average. Net injections into storage totaled 53 Bcf for the week ending August 11, compared with the five-year (2012–16) average net injection of 50 Bcf and last year's net injections of 23 Bcf during the same week. The larger-than-average net injections this week likely resulted from cooler-than-normal temperatures in most of the Lower 48 states and decreased cooling demand for natural gas. Working gas stocks totaled 3,082 Bcf, which is 55 Bcf more than the five-year average and 254 Bcf less than last year at this time.

EIA revises working gas levels for the report weeks from June 30, 2017, through August 4, 2017. Working gas stocks were revised to reflect resubmissions of data during the six-week period from June 30, 2017, to August 4, 2017, in part because of restatements of natural gas in storage from working gas to base gas. Reported revisions caused working gas stocks for August 4, 2017, to change from 3,038 Bcf to 3,029 Bcf. The implied net change between the weeks ending July 28, 2017, and August 4, 2017, increased by 2 Bcf, from 28 Bcf to 30 Bcf. This revision is unusual because it represents a significant adjustment to working gas levels going back several periods. The data that was resubmitted to EIA represented a misstatement of levels, not a misstatement of natural gas flowing into or out of storage, so accordingly, the changes did not have a significant effect on the week-on-week flows. Working gas stocks for the week ending June 30, 2017—the first updated report period—were revised from 2,888 Bcf to 2,878 Bcf. As a result, the implied net change for that report week is 62 Bcf, and the implied net flow to working gas for the week remained unchanged at 72 Bcf.

Net withdrawals from storage are reported in the South Central region for the fifth week in a row. This week also marks the ninth week in row that net withdrawals were reported for salt facilities in the South Central region. Working gas levels at nonsalt facilities in the the South Central region were unchanged. Withdrawals from salt facilities totaled 7 Bcf on the week.

So far in the 2017 refill season, net injections into working gas storage are lower than the five-year average in most regions of the Lower 48 states. Net injections into working gas have been at 1,031 Bcf since March 31, 2017—the traditional beginning of the refill season—compared with the five-year average of 1,241 Bcf over the same period. Smaller-than-average net injections to date during the 2017 injection season are the result of high electric sector demand (that was coupled with warmer-than-normal temperatures on average), relatively high levels of natural gas exports, and storage levels that were already above average at the start of the refill season. The East and Mountain regions are the only regions where net injections have exceeded the five-year average. Cumulative net injections during the 2016 refill season in the Lower 48 states totaled 858 Bcf by this time last year, which was also characterized by unusually high storage levels at the start of the 2016 refill season.

The January 2018 futures price continues trading at a premium over the current spot price. During the most recent storage week, the average natural gas spot price at the Henry Hub was $2.80/MMBtu, while the Nymex futures price of natural gas for delivery in January 2018 averaged $3.21/MMBtu, a difference of 41¢. The premium was 48¢ a year ago. In addition, the average natural gas spot price at the Henry Hub is 8¢ lower than the front-month futures price at the Nymex. A year ago, the spot price was 13¢ higher than the front-month contract.

Reported net implied flows into storage fell within the range of analysts’ expectations. According to The Desk survey of natural gas analysts, estimates of net injections to working natural gas storage ranged from 35 Bcf to 55 Bcf with a median of 48 Bcf. Prices on the futures contract for September delivery fell 1¢/MMBtu to $2.86/MMBtu with 1,047 contracts traded at the release of the Weekly Natural Gas Storage Report. Prices climbed in subsequent trading, gaining 5¢/MMBtu, in heavy trading.

Temperatures were close to normal, on average, in the Lower 48 states during the storage week, but considerably cooler than normal east of the Rockies. Temperatures in the Lower 48 states averaged 73 degrees Fahrenheit (°F), 2°F lower than the normal and 4°F lower than last year at this time. However, on a regional basis, temperatures were somewhat more varied. Most regions east of the Rockies reported lower-than-normal temperatures. Northern regions on the Lower 48 states, including the New England, Middle Atlantic, and East and West North Central Census divisions reported temperatures ranging between 66°F and 69°F, or 2°F to 7°F, on average. Tempertures in southern parts of the country ranged between 75°F and 81°F, or up 3°F, on average. West of the Rockies, temperatures were warmer than normal. Temperatures in the Pacific Census division averaged 75°F, 4°F higher than the normal and 3°F higher than last year at this time.

more storage data

See also:

Map of Potential Natural Gas Market Hubs


Natural gas spot prices
Spot Prices ($/MMBtu)
Thu,
10-Aug
Fri,
11-Aug
Mon,
14-Aug
Tue,
15-Aug
Wed,
16-Aug
Henry Hub
2.87
2.91
2.96
2.93
2.89
New York
1.98
1.71
2.82
2.87
2.32
Chicago
2.83
2.88
2.88
2.88
2.85
Cal. Comp. Avg.*
2.94
2.91
2.91
2.85
2.82
Futures ($/MMBtu)
September Contract
2.985
2.983
2.959
2.935
2.890
October Contract
3.017
3.009
2.989
2.965
2.925
*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: (8/10/17 - 8/16/17)
Average daily values (Bcf/d):
this week
last week
last year
Marketed production
82.3
82.5
79.9
Dry production
73.0
73.2
71.2
Net Canada imports
5.5
5.9
6.7
LNG pipeline deliveries
0.3
0.3
0.2
Total supply
78.6
79.1
78.1

Source: OPIS PointLogic Energy, an IHS Company
Note: LNG pipeline deliveries represent gas sendout from LNG import terminals.

U.S. natural gas consumption - Gas Week: (8/10/17 - 8/16/17)
Average daily values (Bcf/d):
this week
last week
last year
U.S. consumption
59.9
59.9
64.3
    Power
33.5
33.0
38.9
    Industrial
19.6
19.8
19.3
    Residential/commercial
6.8
7.0
6.0
Mexico exports
4.3
4.4
4.3
Pipeline fuel use/losses
6.4
6.4
6.9
LNG pipeline receipts
1.8
1.8
1.1
Total demand
72.4
72.5
76.5

Source: OPIS PointLogic Energy, an IHS Company
Note: LNG pipeline receipts represent pipeline deliveries to LNG export terminals.

Natural gas supply


Weekly natural gas rig count and average Henry Hub
Rigs
Fri, August 11, 2017
Change from
 
last week
last year
Oil rigs
768
0.4%
93.9%
Natural gas rigs
181
-4.2%
118.1%
Note: Excludes any miscellaneous rigs
Rig numbers by type
Fri, August 11, 2017
Change from
 
last week
last year
Vertical
72
-1.4%
16.1%
Horizontal
801
-0.7%
113.6%
Directional
76
2.7%
72.7%
Source: Baker Hughes Inc.


Working gas in underground storage
Stocks
billion cubic feet (Bcf)
Region
2017-08-11
2017-08-04
change
East
701
673
28
Midwest
798
771
27
Mountain
204
202
2
Pacific
292
289
3
South Central
1,087
1,094
-7
Total
3,082
3,029
53
Source: U.S. Energy Information Administration
Working gas in underground storage
Historical comparisons
Year ago
(8/11/16)
5-year average
(2012-2016)
Region
Stocks (Bcf)
% change
Stocks (Bcf)
% change
East
761
-7.9
717
-2.2
Midwest
859
-7.1
776
2.8
Mountain
217
-6.0
181
12.7
Pacific
313
-6.7
332
-12.0
South Central
1,187
-8.4
1,021
6.5
Total
3,336
-7.6
3,027
1.8
Source: U.S. Energy Information Administration


Temperature – heating & cooling degree days (week ending Aug 10)
 
HDD deviation from:
 
CDD deviation from:
Region
HDD Current
normal
last year
CDD Current
normal
last year
New England
3
1
3
29
-13
-34
Middle Atlantic
4
1
4
33
-23
-33
E N Central
11
6
10
17
-36
-55
W N Central
11
8
10
28
-38
-39
South Atlantic
0
0
0
88
-7
-17
E S Central
0
0
0
71
-21
-41
W S Central
0
0
0
115
-9
-30
Mountain
5
2
4
74
2
-8
Pacific
0
-2
-2
71
25
21
United States
5
2
4
60
-12
-24
Note: HDD = heating degree day; CDD = cooling degree day

Source: National Oceanic and Atmospheric Administration

Average temperature (°F)

7-Day Mean ending Aug 10, 2017

Mean Temperature (F) 7-Day Mean ending Aug 10, 2017

Source: NOAA National Weather Service

Deviation between average and normal (°F)

7-Day Mean ending Aug 10, 2017

Mean Temperature Anomaly (F) 7-Day Mean ending Aug 10, 2017

Source: NOAA National Weather Service