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Natural Gas Weekly Update

for week ending July 18, 2018   |  Release date:  July 19, 2018   |  Next release:  July 26, 2018   |   Previous weeks


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

In the News:

End-of-season natural gas storage inventories are forecast to be the lowest since 2008

The U.S. Energy Information Administration’s (EIA) Short-Term Energy Outlook (STEO) forecasts working natural gas inventories on October 31 will be 3,470 billion cubic feet (Bcf), 365 Bcf (10%) lower than the five-year average and 346 Bcf (9%) lower than last year’s level. This forecast inventory level would be the lowest end-of-October storage level since 2008, when inventories ended the month at 3,412 Bcf. The natural gas storage refill season is traditionally April 1—October 31, when natural gas is typically put into underground storage facilities to prepare for increased winter demand for space heating, particularly in the residential and commercial sectors—although injections into storage often occur in the first few weeks of November.

Current New York Mercantile Exchange (Nymex) winter strip futures prices—the average price for November through March futures contracts—for this coming winter have remained relatively unchanged since January 2018 and are similar to the last 3 years’ winter strip futures prices in July. The winter strip price can reflect expectations of meeting peak winter demand based on factors such as natural gas inventories heading into the winter or production expectations. Because inventories are forecast to remain lower than the five-year average, which would put upward pressure on the futures price, other factors are contributing to downward pressure on winter-strip prices:

  • Expectations of continued production growth: The STEO forecasts total U.S. dry natural gas production for November 2018–March 2019 will average about 84 Bcf per day (Bcf/d), up 6 Bcf/d from the winter period last year.
  • Expectations of average injection levels for the remainder of the refill season: Net injections reported since April 27 have generally followed the five-year average, with the forecasted end-of-season level 3% lower than the five-year minimum.

A key uncertainty for end-of-season inventory levels is weather-driven demand from the electric power sector. Natural gas demand for electricity generation tends to peak in the summer months with demand for air conditioning. The current temperature outlook for August–October is for above-normal temperatures throughout the Lower 48 states. The STEO is currently forecasting natural gas use in the electric power sector for August–October to average about 31 Bcf/d, up 2 Bcf/d from last year for the same time period. While production is largely forecasted to keep up with growing sector demand and exports, more extreme weather could lead to higher demand for natural gas-fired generation and, subsequently, a lower inventory level by October 31.

Overview:

(For the Week Ending Wednesday, July 18, 2018)

  • Natural gas spot price movements were mixed this report week (Wednesday, July 11 to Wednesday, July 18). The Henry Hub spot price fell from $2.84 per million British thermal units (MMBtu) last Wednesday to $2.72/MMBtu yesterday.
  • At the New York Mercantile Exchange (Nymex), the August 2018 contract price fell 11¢ from $2.829/MMBtu last Wednesday to $2.721/MMBtu yesterday.
  • Net injections to working gas totaled 46 billion cubic feet (Bcf) for the week ending July 13. Working natural gas stocks are 2,249 Bcf, which is 24% lower than the year-ago level and 19% lower than the five-year (2013–17) average for this week.
  • The natural gas plant liquids composite price at Mont Belvieu, Texas, fell by 51¢, averaging $8.64/MMBtu for the week ending July 18. The price of natural gasoline, ethane, propane, butane, and isobutane all fell, by 4%, 5%, 6%, 5%, and 8%, respectively.
  • According to Baker Hughes, for the week ending Tuesday, July 10, the natural gas rig count increased by 2 to 189. The number of oil-directed rigs remained constant at 863. The total rig count increased by 2, and it now stands at 1,054.

more summary data

Prices/Supply/Demand:

National benchmark spot price decreases. This report week (Wednesday, July 11 to Wednesday, July 18), the Henry Hub spot price fell 12¢ from $2.84/MMBtu last Wednesday to $2.72/MMBtu yesterday. Outside of the Rocky Mountain region, temperatures were generally higher than normal in much of the country, but they didn’t have a significant effect on prices. Trade reports indicated that higher production levels may be placing downward pressure on prices, offsetting price pressure from higher power-burn (consumption of natural gas for power generation) and unusually low levels of natural gas in storage.

Similar to the Henry Hub, prices at the Chicago Citygate decreased 9¢ from $2.75/MMBtu last Wednesday to $2.66/MMBtu yesterday.

SoCal Citygate price rises sharply as a result of supply constraints and hot weather. The price at SoCal Citygate increased $4.47 from $4.60/MMBtu last Wednesday to $9.07/MMBtu yesterday, driven by high temperatures and ongoing delivery constraints in the region. This price increase resulted in a year-to-date record-high daily price for SoCal Citygate.

In parts of Southern California, temperatures averaged nearly 90°F for the week, increasing demand for air conditioning and, as a result, electric power sector consumption of natural gas in the region. Infrastructure bringing natural gas into Southern California is experiencing ongoing maintenance that is limiting flows by more than 500 million cubic feet per day (MMcf/d). In addition, temperatures are expected to remain high throughout the weekend, and the National Oceanic and Atmospheric Administration’s 6-10 Day Outlook indicates that California is expected to have above-normal temperatures throughout the next week.

Prices at PG&E Citygate in Northern California rose 3¢, up from $2.93/MMBtu last Wednesday to $2.96/MMBtu yesterday.

Northeast prices are flat or down. At the Algonquin Citygate, which serves Boston-area consumers, prices went up 1¢ from $2.70/MMBtu last Wednesday to $2.71/MMBtu yesterday. At the Transcontinental Pipeline Zone 6 trading point for New York City, prices decreased 9¢ from $2.92/MMBtu last Wednesday to $2.83/MMBtu yesterday. Temperatures in the Northeast were generally hotter this week, but prices did not closely follow weather trends.

Appalachian prices rise. In contrast to price points in the Northeast, prices in the Appalachian basin increased this report week. Tennessee Zone 4 Marcellus spot prices increased 16¢ from $2.09/MMBtu last Wednesday to $2.25/MMBtu yesterday. Prices at Dominion South in southwest Pennsylvania rose 20¢ from $2.17/MMBtu last Wednesday to $2.37/MMBtu yesterday. However, regional prices are still trading at a significant discount relative to the Henry Hub and other prices in the nation.

Nymex futures decrease. At the Nymex, the price of the August 2018 contract decreased 11¢, from $2.829/MMBtu last Wednesday to $2.721/MMBtu yesterday. The price of the 12-month strip averaging August 2018 through July 2019 futures contracts declined 9¢ to $2.733/MMBtu.

Overall supply remains largely unchanged. According to data from PointLogic Energy, the average total supply of natural gas fell by 1% compared with the previous report week. Dry natural gas production decreased by 1% compared with the previous report week. Average net imports from Canada increased by 2% from last week.

Overall demand increases on higher power burn . Total U.S. consumption of natural gas rose by 4% compared with the previous report week, according to data from PointLogic Energy. Natural gas consumed for power generation climbed by 9% week over week. Industrial sector consumption decreased by 1% week over week. In the residential and commercial sectors, consumption declined by 6%. Natural gas exports to Mexico decreased 3%.

U.S. LNG exports increase week over week. Six LNG vessels, combined LNG-carrying capacity 21.7 billion cubic feet per (Bcf), departed the United States from July 12 through July 18 (all from the Sabine Pass liquefaction terminal).

Kinder Morgan Inc., the developer of Elba Island liquefaction facility in Georgia, which is currently under construction, has announced a delay in commissioning the facility until the fourth quarter of this year, according to Bloomberg. Originally, the commissioning process was expected to begin in the third quarter. Kinder Morgan attributed the delay to construction issues and issues with assembling units at the site. Elba Island is one of six liquefaction projects either currently operating or under construction in the United States. The facility has a nameplate capacity of 0.33 Bcf/d and would consist of 10 modular liquefaction units called trains, each with a capacity of 0.033 Bcf/d. The facility will be commissioned in two phases. The first phase will involve commissioning six of the modular liquefaction trains.

A full list of U.S. liquefaction facilities is available in EIA’s database of liquefaction facilities.

Storage:

Net injections fall lower than the five-year average for the third week in a row. Net injections into storage totaled 46 Bcf for the week ending July 13, compared with the five-year (2013–17) average net injections of 62 Bcf and last year's net injections of 31 Bcf during the same week. Working gas stocks totaled 2,249 Bcf, which is 535 Bcf lower than the five-year average and 710 Bcf lower than last year at this time.

Working gas stocks are on pace to end the refill season lower than the five-year range. Net injections into storage are 17% lower than the five-year average rate so far in the 2018 refill season. If working gas stocks match the five-year average rate of injections of 9.4 Bcf/d for the remainder of the refill season, inventories will total 3,280 Bcf on October 31, compared with the five-year low of 3,560 Bcf for that time of year. In the Lower 48 states, total working gas stocks are currently 95 Bcf higher than the bottom of the five-year range, but 9 Bcf and 36 Bcf lower than the five-year range in the East and Midwest regions, respectively. The South Central region posted working gas stocks 129 Bcf higher than the bottom of the five-year range.

Despite relatively low storage inventories, the average January 2019 futures contract price traded at a lower premium to the average spot price than last year at this time. Price differences between the spot price and the futures prices at the Nymex indicate limited economic incentives for net injections into working gas. During the most recent storage week, the average natural gas spot price at the Henry Hub averaged $2.85/MMBtu while the Nymex futures price of natural gas for delivery in January 2019 averaged $3.04/MMBtu, 20¢/MMBtu higher than the spot price. A year ago, the January contract was 34¢/MMBtu higher than the Henry Hub spot price.

Reported net injections into storage are on the low end of the range of analysts’ expections. According to The Bloomberg survey of natural gas analysts, estimates of the weekly net change from working natural gas storage ranged from net injections of 44 Bcf to 65 Bcf, with a median estimate of 56 Bcf. At the 10:30 a.m. release of the Weekly Natural Gas Storage Report (WNGSR), the price of the Nymex futures contract for August delivery at the Henry Hub increased 3¢/MMBtu to $2.75/MMBtu, with 1,351 trades executed. Prices increased somewhat in subsequent trading but remained close to $2.75/MMBtu.

Temperatures are in the higher-than-normal range for the storage week. Temperatures in the Lower 48 states averaged 76 degrees Fahrenheit (°F), 1°F higher than normal and 1°F lower than last year at this time. Temperatures were also 3°F lower than the level reported for the previous week.

more storage data

See also:



Natural gas spot prices
Spot Prices ($/MMBtu)
Thu,
12-Jul
Fri,
13-Jul
Mon,
16-Jul
Tue,
17-Jul
Wed,
18-Jul
Henry Hub
2.84
2.80
2.74
2.78
2.72
New York
2.94
2.94
2.92
2.85
2.83
Chicago
2.74
2.63
2.70
2.72
2.66
Cal. Comp. Avg.*
3.05
2.99
3.01
3.18
3.12
Futures ($/MMBtu)
August contract
2.797
2.752
2.759
2.740
2.721
September contract
2.766
2.724
2.730
2.707
2.689
*Avg. of NGI's reported prices for: Malin, PG&E Citygate, and Southern California Border Avg.
Sources: Natural Gas Intelligence and CME Group as compiled by Bloomberg, L.P.
Natural gas futures prices
Natural gas liquids spot prices


U.S. natural gas supply - Gas Week: (7/12/18 - 7/18/18)
Average daily values (Bcf/d):
this week
last week
last year
Marketed production
91.2
92.0
81.9
Dry production
80.4
81.0
72.4
Net Canada imports
6.1
6.0
6.1
LNG pipeline deliveries
0.1
0.1
0.1
Total supply
86.6
87.1
78.5

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: (7/12/18 - 7/18/18)
Average daily values (Bcf/d):
this week
last week
last year
U.S. consumption
65.3
62.5
60.5
    Power
39.0
35.7
35.0
    Industrial
19.7
19.8
19.6
    Residential/commercial
6.7
7.1
5.9
Mexico exports
4.4
4.6
4.4
Pipeline fuel use/losses
7.0
6.7
6.5
LNG pipeline receipts
3.3
3.3
2.2
Total demand
80.0
77.1
73.6

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
Tue, July 10, 2018
Change from
 
last week
last year
Oil rigs
863
0.0%
12.8%
Natural gas rigs
189
1.1%
1.1%
Note: Excludes any miscellaneous rigs
Rig numbers by type
Tue, July 10, 2018
Change from
 
last week
last year
Vertical
56
1.8%
-26.3%
Horizontal
930
0.0%
15.7%
Directional
68
1.5%
-5.6%
Source: Baker Hughes Inc.


Working gas in underground storage
Stocks
billion cubic feet (Bcf)
Region
2018-07-13
2018-07-06
change
East
507
480
27
Midwest
501
477
24
Mountain
144
143
1
Pacific
259
260
-1
South Central
838
   843
-5
Total
2,249
 2,203
46
Source: Form EIA-912, "Weekly Underground Natural Gas Storage Report"
Working gas in underground storage
Historical comparisons
Year ago
(7/13/17)
5-year average
(2013-2017)
Region
Stocks (Bcf)
% change
Stocks (Bcf)
% change
East
606
-16.3
613
-17.3
Midwest
731
-31.5
666
-24.8
Mountain
194
-25.8
171
-15.8
Pacific
292
-11.3
309
-16.2
South Central
1,136
-26.2
1,025
-18.2
Total
2,959
-24.0
2,784
-19.2
Source: Form EIA-912, "Weekly Underground Natural Gas Storage Report"


Temperature – heating & cooling degree days (week ending Jul 12)
 
HDD deviation from:
 
CDD deviation from:
Region
HDD Current
normal
last year
CDD Current
normal
last year
New England
2
1
1
43
5
-3
Middle Atlantic
1
0
1
56
2
-3
E N Central
2
1
1
54
0
-6
W N Central
0
-3
0
86
18
3
South Atlantic
0
0
0
93
-2
-13
E S Central
0
0
0
100
8
5
W S Central
0
0
0
121
0
-3
Mountain
0
-7
0
95
20
-10
Pacific
1
-4
0
81
42
1
United States
1
-1
0
80
9
-4
Note: HDD = heating degree day; CDD = cooling degree day

Source: National Oceanic and Atmospheric Administration

Average temperature (°F)

7-Day Mean ending Jul 12, 2018

Mean Temperature (F) 7-Day Mean ending Jul 12, 2018

Source: NOAA National Weather Service

Deviation between average and normal (°F)

7-Day Mean ending Jul 12, 2018

Mean Temperature Anomaly (F) 7-Day Mean ending Jul 12, 2018

Source: NOAA National Weather Service