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Natural Gas Weekly Update Archive

for week ending February 16, 2011  |  Release date:  February 17, 2011   |  Previous weeks

Released: February 17, 2011 at 2:00 P.M.
Next Release: Thursday, February 24, 2011
Overview (For the Week Ending Wednesday, February 16, 2011)

  • A reprieve from extreme cold in much of the country this week limited space-heating demand, contributing to price declines. The biggest price decreases occurred in the Northeast. During the report week (February 9-16), the Henry Hub spot price decreased $0.29 to $3.93 per million Btu (MMBtu).
  • At the New York Mercantile Exchange (NYMEX), futures prices also decreased. The futures contract for March delivery decreased by $0.12 on the week to $3.92 per MMBtu.
  • As of Friday, February 11, working gas in underground storage was 1,911 billion cubic feet (Bcf), which is 6.3 percent below the 5-year (2006-2010) average, according to the Energy Information Administration’s (EIA) Weekly Natural Gas Storage Report (WNGSR).
  • The natural gas rotary rig count decreased by 5 rigs this week to 906, according to data reported on February 11 by Baker Hughes Incorporated. The number of rigs dedicated to drilling for natural gas prospects is currently 15 higher than this time last year.

NYMEX Natural Gas Futures Near-Month Contract Settlement Price, West Texas Intermediate Crude Oil Spot Price, and Henry Hub Natural Gas Spot Price Graph

More Summary Data

As the extreme cold left much of the lower 48 States this week, natural gas demand for space heating and as a fuel for electric power plants fell precipitously. Compared with the prior report week, U.S. natural gas average daily consumption decreased about 17.1 percent to 82.1 Bcf, according to BENTEK Energy, LLC. Combined consumption in the residential and commercial sectors decreased 23.3 percent to 40.2 Bcf per day. This lower demand contributed to widespread and, in many cases, steep declines in prices. The Henry Hub price decreased on the week by $0.29 per MMBtu, or 6.9 percent, while prices at most other markets in the Gulf of Mexico Producing region decreased in the range of 32-45 cents per MMBtu, or between 8-10 percent. The spot price for natural gas in West Texas on the El Paso Natural Gas pipeline declined $0.55 per MMBtu to $3.83 per MMBtu, illustrating the sharp declines in many regions where temperatures have warmed after last week’s cold spell. During the most recent cold spell, over 5 Bcf per day of domestic production was off-line due to freezing of equipment and maintenance. However, production levels have now recovered to near those seen before the deep freeze. During the report week, production increased 4.3 percent in comparison with the prior week. The general level of prices continues to be much lower than this time last year. Wednesday’s Henry Hub price of $3.93 per MMBtu was 30 percent lower than the price of $5.65 per MMBtu on February 16, 2010.

Prices declined most severely in the Northeast, where reduced consumption allowed pipelines to lift constraints. Several market centers in the Northeast region posted declines of more than $4.00 per MMBtu, or more than 45 percent on the week. For delivery in Zone 6 (New York) off Transcontinental Gas Pipe Line, the price yesterday (February 16) averaged $4.63 per MMBtu, which was $7.02 less than the previous Wednesday’s price. During the report week, the Transco Zone 6 price was, on average, about $1.39 per MMBtu higher than the Henry Hub’s, a significant decrease from the prior week’s average differential of $4.40 per MMBtu. The closely-watched difference in the Northeast price over Gulf of Mexico regional prices tends to fluctuate severely during the winter. Interstate pipelines have limited flexibility to transport non-firm supplies between the two markets because of colder weather and the associated increase in space-heating demand in the Northeast, causing differences in local supply and demand conditions to develop. The lower premium during this report week was the result of temperatures in the Northeast rising to above-normal levels, which reduced heating demand and allowed greater flexibility on the region’s transportation system.

Further to the west, week-to-week price decreases were less severe in the Rockies and California markets. At Rockies trading locations, prices started the week much lower than in the Northeast and decreases during the report week were generally less than 7 percent. The price for supplies on Kern River Pipeline in Utah (for delivery into California) decreased just $0.19 to $3.80 per MMBtu. Yesterday’s price of $3.73 per MMBtu for natural gas off of Colorado Interstate Pipeline Company (the lowest price in the country) represented a decrease of $0.27 per MMBtu on the week.

U.S. imports of natural gas were significantly lower during the report week in comparison with the prior week. According to BENTEK, which monitors flows on the continental pipeline network, U.S imports from Canada during the report week decreased 10.9 percent relative to the prior week to 7.5 Bcf per day. U.S. imports from Canada were also 9.7 percent lower in comparison with this time last year. LNG imports (as measured by sendout from regasification terminals) averaged 1.2 Bcf per day during this report week, which was roughly equivalent with the prior week, but about 31 percent lower than this time last year. The declines in pipeline and LNG imports likely resulted from suppliers expecting relative price weakness during the week because of lower demand.

Spot Prices

At the NYMEX, the price of the near-month contract (for March delivery) decreased $0.12 during the report week to $3.921 per MMBtu. With the weather outlook for much of the country indicating moderate temperatures will continue, the price of the March contract decreased in relatively small increments in three of five trading sessions during the report week. The March contract is now priced almost $0.40 lower than the final expiration price of the February 2011 contract. Downward price pressure also appears related to a very strong outlook for domestic production. At the end of trading yesterday, the 12-month strip, which is the average for natural gas futures contracts over the next year, was priced at $4.28 per MMBtu, a decrease of about $0.12 per MMBtu, or 2.8 percent, since last Wednesday.

Wellhead Prices
Annual Energy Review
More Price Data

Working natural gas in storage fell to 1,911 Bcf as of Friday, February 11, according to EIA’s WNGSR (see Storage Figure). The 233 Bcf draw is much larger than the 5-year average draw for the week of 150 Bcf and last year’s draw of 190 Bcf. Stocks are now 141 Bcf below last year’s level and 128 Bcf below the 5-year average.

The week’s draw marks the fourth week in a row that stocks have declined more rapidly than last year. A continuing dip in production largely due to freeze-offs in gas-producing regions has contributed to a larger year-over-year draw for the past several weeks. The resumption of colder weather relative to last year also necessitated a larger draw for residential and commercial heating. As a result of the recent large withdrawals from storage, inventories in the East region are now at their lowest point in the last 5 years, 12.6 percent below the 5-year average.

Temperatures in the lower 48 States during the week ending February 10 were colder than normal for the third week in a row and also colder than last year. The National Weather Service’s degree-day data show that the temperature in the lower 48 States last week averaged 30.3 degrees, 4.9 degrees colder than the 5-year average and 2.1 degrees colder than last year (See Temperature Maps and Data). Every region of the country was colder than normal with the exceptions of the Pacific census region. The West South Central Census region was a dramatic 12.6 degrees colder than normal. Heating degree days nationwide were about 16 percent above average, and 7 percent above last year.

Storage Table

More Storage Data
Other Market Trends

EIA Unveils New Website. This week, EIA unveiled its new website at www.eia.gov. The new site includes several new features, including a new logo, homepage, and improved navigation. The website also brings with it the Today in Energy page, a user-friendly energy education product that provides timely analysis of current issues in energy.

EIA Releases Oman Country Analysis Brief. EIA released a Country Analysis Brief (CAB) on Oman on February 8. Oman, which borders the United Arab Emirates, Saudi Arabia, and Yemen, is the largest non-OPEC exporter of oil in the Middle East, and possesses significant oil and natural gas reserves. Oman’s proved oil reserves total 5.5 billion barrels, while proved natural gas reserves total 30 trillion cubic feet (Tcf). On the other hand, nearby Qatar has 896 Tcf of natural gas reserves. The country currently requires an increasing supply of natural gas to meet demand for domestic consumption, gas reinjection use, and export obligations. Oman has experienced service interruptions for electric power consumers as a result of having too little natural gas, and the Ministry of Oil has announced plans to increase reserves by one Tcf per year for the next 20 years through programs akin to enhanced oil recovery techniques used in the oil sector. More Country Analysis Briefs are available here: http://www.eia.gov/countries/

Natural Gas Transportation Update

  • With warmer temperatures moving into the lower 48 States, pipeline companies relaxed flow restrictions this week. The return to nonpeak flow conditions on the interstate pipeline grid was perhaps most noticeable in the Midwest and Midcontinent, where Natural Gas Pipeline of America ended a Cold Weather Advisory that had been in place since February 1. Other pipeline companies, such as CenterPoint Energy Gas Transmission Company and Southern Star Central Gas Pipeline Corporation, both with service territories in the Midcontinent, also rescinded critical notices from the prior week.
  • Tennessee Gas Pipeline Company declared a force majeure event Friday, February 11, for Station 214 in Carrolton, Ohio, after a possible rupture occurred in the vicinity. Tennessee reported no injuries and no interruption in service. However, the pipeline this week said it will limit imbalances on its system in some market areas as a result of the incident and other reductions in operational flexibility.
  • Sea Robin Pipeline Company this week said it will halt operations at its compressor station in Erath, Louisiana, starting Wednesday for scheduled maintenance. According to Sea Robin, interconnects with Columbia Gulf and Henry Hub-Sabine 2-South will be the only delivery points physically available for nominations during this work. All remaining high-pressure delivery points downstream of Erath will remain shut-in until further notice.
  • Kern River Gas Transmission Corporation announced on Monday that it had completed an emergency shutdown test and maintenance on two units at its compressor station in Fillmore, California. The station resumed full service on Wednesday, Kern River said, and operational system capacity through Veyo Compressor station was returned to the monthly default capacity of about 2,200 million cubic feet per day.

See Weekly Natural Gas Storage Report for additional Natural Gas Storage Data.
See Natural Gas Analysis for additional Natural Gas Reports and Articles.
See Short-Term Energy Outlook for additional Natural Gas Prices, Supply, and Demand.