Natural Gas

Overview:

(For the Week Ending Wednesday, December 21, 2011)

• Natural gas prices at most trading locations across the country fell or remained stable during the report week. The spot price at the Henry Hub fell 3 cents, from $3.08 per MMBtu last Wednesday, December 14, to $3.05 per MMBtu yesterday, December 21.
• At the New York Mercantile Exchange (NYMEX), the near-month (January 2012) futures contract gained 1.9 cents, rising from $3.136 per MMBtu to $3.155 per MMBtu.
• Inventories of working natural gas in storage fell by 100 this week, bringing inventories to 3,629 Bcf, according to EIA's Weekly Natural Gas Storage Report.
• The natural gas rotary rig count, as reported by Baker Hughes Incorporated, was 818 on December 16. This represents a decline of 2 rigs, and was the seventh consecutive week of decline for natural gas rigs. Oil rigs (which can also encounter associated natural gas) rose by 35 to 1,196.

more summary data

Prices:

Even though today marks the first full day of winter, natural gas prices fell on the report week at most market locations. The Henry Hub price flirted with the sub-$3 per MMBtu mark, but ultimately ranged within $3.01 per MMBtu and $3.08 per MMBtu, ending the week three cents below its value last Wednesday. Although Northeastern prices increased with cold weather, they eventually fell by the end of the report week. Forecasts for colder temperatures across most of the country heading into the weekend, however, could lead to some gains in prices.

Supply fell slightly this week, yet remained 4 percent above year-ago levels, the result of continued strength in domestic production. Imports from Canada fell by 3.2 percent from the previous week, with only the West posting increases from last week, according to Bentek. LNG sendout declined overall this week. Almost all recent LNG sendout has come from the Elba Island LNG terminal in Georgia and the Everett LNG terminal in Boston, according to Bentek. Demand declined on the week despite rising somewhat mid-week.

Rockies prices this week were generally an exception to the net declines seen in other parts of the country. Prices in the Rockies jumped in the second half of the report week, as snow and cold temperatures hit the area. The spot price at the Opal Hub in Wyoming, a proxy for Rockies prices, rose from $3.02 per MMBtu last Wednesday to $3.18 per MMBtu yesterday. According to data from Bentek, demand for power and residential and commercial heating climbed to 3.7 Bcf, a 0.8 Bcf increase from the previous day. Forecasts for colder temperatures likely drove up the Rockies prices at the end of the week. Although the Ruby Pipeline, which moves Rockies natural gas west, came back online this week after force majeure, Rockies outflows declined.

At the NYMEX, the January 2012 contract posted a small gain over the report week, rising from $3.136 per MMBtu last Wednesday to $3.155 per MMBtu yesterday. The contract recovered losses from earlier in the week; on Monday, the contract ended the day at $3.096 per MMBtu. The 12-month strip (the average of the 12 contracts between January and December 2012) followed a similar pattern, rising from $3.405 per MMBtu last Wednesday to $3.430 per MMBtu yesterday.

more price data

Storage

Working natural gas in storage fell to 3,629 Bcf as of Friday, December 16, according to EIA's WNGSR. This represents an implied net withdrawal of 100 Bcf, slighty less than the previous week. The draw was much smaller than the 5-year average draw of 140 Bcf as well as last year's draw of 181 Bcf.

For the second week in a row, the West Region saw a relatively large draw. While the East and Producing Regions continue to draw less gas compared to historical averages, the West Region drew significantly more. Slightly colder weather combined with a temporary outage to the Ruby Pipeline, which carries gas to the region, are likely responsible. All regions remain well above 5-year average levels.

Temperatures during the week ending December 15 were 1.9 degrees warmer than the 30-year normal temperature and 5.7 degrees warmer than last year. All regions except the Mountain and Pacific experienced relatively warm temperatures during the week.  Those two regions, largely comprising the West storage region, were respectively 1.0 and 3.1 degrees colder than the 5-year average. Nationwide, heating degree-days were down 6.2 percent from average and 17.3 percent from last year.

more storage data

See also:

• Natural Gas Analysis Reports
• Short-Term Energy Outlook