Natural Gas Weekly Update - Printer-Friendly Version
Natural Gas Weekly Update Text
Released: June 23, 2011 at 2:00 P.M.
Next Release: Thursday, June 30, 2011
Overview (For the Week Ending Wednesday, June 22, 2011)

  • Natural gas prices fell slightly at most market locations from Wednesday, June 15 to Wednesday, June 22. The Henry Hub price fell 10 cents from $4.52 per million Btu (MMBtu) last Wednesday to $4.42 per MMBtu yesterday.

  • At the New York Mercantile Exchange, the price of the July 2011 near-month futures contract fell by 26 cents, or about 6 percent, from $4.58 last Wednesday to $4.32 yesterday.

  • Working natural gas in storage rose to 2,354 this week, according to EIA’s Weekly Natural Gas Storage Report (WNGSR).

  • The natural gas rotary rig count, as reported by Baker Hughes Incorporated, fell to 870 as of Friday, June 17.

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

Prices fell slightly at most market locations, with some exceptions, mainly in the Northeast. The small declines in prices were likely a reflection of moderate weather during the report week across much of the country. Recent rain in Texas may have played a role in moderating demand for natural gas to meet cooling needs. At Transcontinental Pipeline’s Zone 6 pricing point for delivery into New York City, prices rose on the week 8 cents. At Tennessee Gas Pipeline’s Zone 5 and Zone 6 trading points in New England, prices increased 9 cents and 12 cents on the week, respectively, with increases at the end of the report week likely due to concerns about reduced flows on the pipeline and an imbalance warning issued by El Paso Corporation, the pipeline’s parent company.

Natural gas demand rose slightly from the previous week, and remained flat year over year. Declines in residential and commercial consumption were offset by a 5.3 percent increase in consumption for natural gas for electric power generation and a 2.5 percent increase in industrial consumption, according to BENTEK Energy Services, LLC data. Despite the week over week increase, electric power consumption remains 10 percent below levels during the same week last year, most likely the result of moderate temperatures compared to this time last year. Power burn near the end of the report week declined substantially, specifically in the Midwest, Gulf area, and Southeast.

Supply this week increased slightly, as increases in production were offset by declines in pipeline imports from Canada. Production increased 0.6 percent, according to data from BENTEK and is 7.2 percent greater than its year-ago level. Canadian imports dropped 5.4 percent this week, with all three import regions (West, Midwest, and Northeast) posting declines. According to BENTEK, strong natural gas demand from hot weather in early June has helped spur production growth in the Marcellus and Huron Shale areas of West Virginia. Production from West Virginia has grown over 350 million cubic feet (MMcf) per day year-to-date, according to BENTEK, and exceeded 1 billion cubic feet (Bcf) per day in early June.

While imports from Canada declined, pipeline exports to Mexico increased on the week. Already up substantially from last year, exports to Mexico averaged 1.32 Bcf per day this week, an increase of about 5.6 percent from the previous week’s level, according to BENTEK. During the same week last year, exports to Mexico averaged 0.9 Bcf per day. Demand for natural gas for power generation has increased substantially in Mexico, while the national petroleum company PEMEX has reported declines in natural gas production.

Spot Prices

NYMEX price declines were steeper than they were on the spot market. The near-month (July 2011) contract dropped 26 cents, from $4.58 per MMBtu last Wednesday to $4.32 per MMBtu yesterday. The 12-month strip dropped 23 cents from $4.83 per MMBtu last Wednesday to $4.60 per MMBtu yesterday.

Wellhead Prices
Annual Energy Review
More Price Data

Working natural gas in storage rose to 2,354 Bcf as of Friday, June 17, according to EIA’s WNGSR (see Storage Figure). For the first time in four weeks, the net build of 98 Bcf was higher than both the 5-year average build for the week of 86 Bcf and last year’s build of 81 Bcf. This week’s build was the second largest so far in 2011. Stocks are now 258 Bcf below last year’s level and 64 Bcf below the 5-year average.

The East and West Regions experienced rare strong builds. While both regions remain well below the 5-year average levels, the East and West builds were 7 and 5 Bcf above average, respectively. Meanwhile, the Producing Region which has seen mostly larger than average builds in 2011 grew at the national average pace this week. The region remains 109 Bcf above the 5-year average.

Temperatures in the lower 48 States during the week ending June 16 matched normal levels but were slightly cooler than last year. The National Weather Service’s degree-day data show that the temperature in the lower 48 States last week averaged 70.1 degrees, 2.3 degrees cooler than the previous week, and also 2.3 degrees cooler than last year (see Temperature Maps and Data). For the sixth straight week, the Pacific Region has been cooler than normal. The Northeastern and Midwestern regions were also cooler than normal while much of the South was warmer. The highest temperatures were in the West South Central Region which averaged 84.3 degrees.

Storage Table

More Storage Data
Other Market Trends

Processing Plant Capacity Increases from 2004 to 2009 as Plants Also Become More Efficient. EIA on June 17 released a special analysis of natural gas processing plants in the United States. According to the report, processing plant capacity increased a net 12 percent over the period from 2004 to 2009. As of 2009, there were 493 processing plants in the United States with a total capacity of 77.5 Bcf per day. Texas, the State with the highest capacity in 2009 at 19.7 MMcf day, saw the largest increase, with total capacity rising more than 4 Bcf per day. Other substantial increases in capacity occurred in Louisiana, Colorado, Mississippi, and Arkansas. Average capacity per plant nationwide rose from 114 MMcf per day to 157 MMcf per day. Though total capacity rose, the number of processing plants fell in 15 states. As old plants were retired, they were replaced by new, more efficient processing plants. Plants tend to be clustered in major natural gas producing areas, such as the Gulf Coast, the Rocky Mountains, and Alaska. The Gulf of Mexico States (Texas, Louisiana, Mississippi, Alabama, and Florida), which have traditionally accounted for the majority of natural gas production, are home to gas rich in natural gas liquids (NGLs). The NGLs must be removed before the natural gas is of pipeline quality, and processing plants play an important role here; Texas and Louisiana alone account for nearly half of the total processing capacity in the United States.

Rig Count Drops to 870. The natural gas rotary rig count, as reported by Baker Hughes Incorporated on June 17, fell to 870, a drop of 9 from the previous week’s level. Natural gas rigs are now 9 percent below their year-ago level, and 5 percent below their level at the beginning of 2011. Natural gas rigs have oscillated in the upper 800s for the past few months, as oil rigs (currently at 984) have increased steadily. Current strength in natural gas production (despite the lack of growth in the rig count) may be partially attributable to associated production from oil wells. Horizontal rigs (which include both oil and natural gas) have risen 12 percent since the beginning of 2011 and 28 percent since the same time last year. Vertical rigs (also including both oil and natural gas) have risen 4.3 percent since the beginning of the year and 16 percent since the same time last year.

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.