Natural Gas

Overview:

(For the Week Ending Wednesday, March 14, 2012)

• Persistent warmer-than-normal temperatures throughout the report week contributed to the lengthening downward trend in natural gas prices across much of the country. The Henry Hub price closed at $2.13 per million British thermal units (MMBtu) on March 14, down 11 cents for the week.
• At the New York Mercantile Exchange (NYMEX), the April 2012 natural gas contract fell 1.8 cents per MMBtu for the week to close at $2.284 per MMBtu.
• Working natural gas in storage fell last week to 2,369 billion cubic feet (Bcf) as of Friday, March 9, according to the U.S. Energy Information Administration's (EIA) Weekly Natural Gas Storage Report (WNGSR). The implied net withdrawal for the week was 64 Bcf, positioning storage volumes 735 Bcf above year-ago levels.
• The natural gas rotary rig count, as reported March 9 by Baker Hughes Incorporated, fell for the ninth consecutive week, decreasing by 21 to 670 active units, 24 percent below last year's level for the week and the lowest count since July 2009. Meanwhile, the oil-directed rig count rose by 3 to 1296, 57 percent above the year-ago level.



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Prices:

Consistent with declining natural gas prices across most of the nation, the Henry Hub day ahead price fell 4.9 percent, from $2.24 per MMBtu the previous Wednesday to $2.13 per MMBtu yesterday. With the exception of last Thursday (when there was no change), the price fell consistently throughout the week as warmer temperatures moved across most of the country.

At the NYMEX, the April 2012 contract fell from $2.302 per MMBtu last Wednesday to $2.284 per MMBtu yesterday, a decrease of 1.8 cents (0.8 percent). There was some volatility during the week, however, with prices reaching a high of $2.324 on Friday before falling to a low of $2.269 the following Monday, then rebounding on Tuesday.

Natural gas prices continued to trend downward across most of the country throughout the week. An exception was for deliveries into the Pacific Northwest, where prices at the Sumas trading point (located in Washington State) fell toward the end of last week before rebounding on Monday, ending the week up 2 cents (0.9%). Prices for the Algonquin citygate, which serves Boston markets, began the week at $2.97 per MMBtu, rose 16 cents per MMBtu on Tuesday before dropping significantly, ending the week at $2.45 per MMBtu, down $0.52 per MMBtu for the report week. Similarly, spot prices at Transcontinental Pipeline's Zone 6 trading point for delivery into New York City started the week at $2.44 per MMBtu, then rose briefly before declining steadily throughout the balance of the week, closing yesterday at $2.21 per MMBtu (down 9.4 percent). The Chicago citygate spot price over the same period registered daily declines, finishing the week at $2.12 per MMBtu (down 8.6 percent).

After increasing modestly on Friday, consumption posted daily declines through Wednesday, registering an overall decline for the week. According to estimates from BENTEK Energy LLC (Bentek), domestic natural gas consumption fell by 13.1 percent from the previous week. The residential/commercial sector posted the largest decrease, 24.9 percent, while power and industrial sector demand ended the week down 4.1 percent and 3.7 percent, respectively.

U.S. imports from Canada were down 8.0 percent for the week, driven by a 46.2 percent drop in shipments to the Northeast, reflecting much warmer temperatures in that region, that offset comparatively modest increases to both the West and Midwest regions. In combination with essentially flat dry gas production and an overall drop in LNG sendout, this resulted in virtually no change in overall supply over the week. According to Bentek estimates, the week's average total natural gas supply declined 0.1 percent from last week's average. Compared with the same period last year, however, domestic weekly dry gas production was up 5.4 percent, and both total weekly imports from Canada and U.S. LNG sendout volumes were below last year's levels, by 6.0 percent and 63.9 percent, respectively.

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Storage

Working natural gas in storage fell to 2,369 Bcf as of Friday, March 9, according to EIA's WNGSR. This represents an implied net withdrawal of 64 Bcf from the previous week, which is less than both the 5-year average implied net withdrawal of 79 Bcf, but higher than the year-ago implied net withdrawal of 60 Bcf. Inventories in all three regions posted declines, with the East Region contributing the most to this week's implied net withdrawal, with a decrease of 55 Bcf (a 4.9 percent decline from the previous week's level).

Stocks were 807 Bcf higher than the 5-year average level of 1,562 Bcf and 735 Bcf higher than last year at this time. Inventories in the Producing Region remain well above their 5-year average, at 361 Bcf (59.8 percent) above the region's 5-year average of 604 Bcf . Stocks in the East and West Regions are also above their 5-year averages by 340 Bcf (47.3 percent) and 106 Bcf (44.4 percent), respectively.

Temperatures during the week ending March 8 were 3.7 degrees warmer than the 30-year normal temperature and 3.1 degrees warmer than the same period last year. During the week all regions with the exception of the Mountain Region in the West were warmer than normal. The East North Central Region in the Midwest and the Middle Atlantic Region in the Northeast were particularly warm, averaging 5.6 and 5.4 degrees warmer than normal, respectively. The average temperature in the Mountain Region in the West was cool, averaging 0.4 degrees cooler than normal. Heating degree-days nationwide were down 15.0 percent from normal and 12.9 percent from last year.

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See also:

• Natural Gas Analysis Reports
• Short-Term Energy Outlook