Natural Gas

Overview:

(For the Week Ending Wednesday, November 28, 2012)

• Natural gas prices over the report week generally rose in most locations across the country. The Henry Hub price rose 11 cents from $3.59 per million British thermal units (MMBtu) on Wednesday, November 21, to $3.70 per MMBtu on Wednesday, November 28.
• The natural gas New York Mercantile Exchange (NYMEX) near-month futures price, in contrast, fell over the report week, from $3.903 per MMBtu last Wednesday to $3.696 per MMBtu yesterday.
• Working natural gas in storage rose last week to 3,877 billion cubic feet (Bcf) as of Friday, November 23, according to the U.S. Energy Information Administration's (EIA) Weekly Natural Gas Storage Report (WNGSR). An implied storage build of 4 Bcf for the week positioned storage volumes 26 Bcf above year-ago levels.
• The natural gas rotary rig count rose to 428 last week, according to data released by Baker Hughes Incorporated on November 23. This represents an increase of 11 rigs from the previous week. The oil rig count fell by 2 to 1,388 active units.

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Prices:

Natural gas prices generally rose during the report week. This report week was shortened by one day because of the Thanksgiving holiday. The Henry Hub spot price rose 11 cents from $3.59 per MMBtu last Wednesday to $3.70 per MMBtu yesterday. Over the month of November, the Henry Hub price has generally risen as the weather has gotten colder. Gains were largest in the Northeast, and in California and the Southwest, where temperatures were colder than normal.

Natural gas spot prices in the Northeast rose sharply in the middle of the report week. Cold weather in New England pushed spot prices at the Algonquin Citygate, which serves Boston, up to $12.58 per MMBtu on Monday, its highest level so far in 2012. Prices held on to some of these gains the rest of the report week, ending at $9.58 per MMBtu, an increase of $1.98 per MMBtu from the previous Wednesday. Prices at Transcontinental Pipeline's Zone 6 trading point for delivery into New York City also rose over the week, although not as sharply as in New England, and ended the report week at $5.40 per MMBtu, a net increase of $1.45 per MMBtu.

Natural gas domestic consumption rose by 8.7 percent this week, according to data from Bentek. This increase was driven by a 22.2% rise in residential and commercial consumption for heating. Consumption of natural gas for electric power generation fell by 4.9 percent, and industrial consumption rose 1.9 percent.

Supply rose by 0.3 percent this week, as increases in production offset declines in pipeline imports from Canada. Natural gas production rose 0.5 percent, according to Bentek data, while imports from Canada fell by 1.2 percent. Declines in imports in the West and Midwest regions offset an increase in imports to the Northeast, which were likely used to meet the week's weather-related demand.

The NYMEX near-month (December 2012) futures contract expired Wednesday, November 28, at $3.696 per MMBtu. The December contract expired at less than one cent per MMBtu above where it began its tenure as the near-month contract. During the month, the contract rose to a high of $3.903 per MMBtu on November 21, but gave back these gains in the final days of trading. During the report week, the 12-month strip (the average of the 12 contracts from December 2012 to November 2013) fell from $4.034 per MMBtu to $3.855 per MMBtu.

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Storage

Working natural gas in storage increased to 3,877 Bcf as of Friday, November 23, according to EIA's WNGSR. This represents an implied net injection of 4 Bcf from the previous week. This week's injection was 22 Bcf above the 5-year (2007-2011) average net withdrawal of 18 Bcf, and 2 Bcf above last year's injection of 2 Bcf. Inventories are currently 26 Bcf (0.7 percent) greater than last year at this time and 190 Bcf (5.2 percent) greater than the 5-year average.

Two of the three storage regions posted increases this week. Inventories in the West and Producing regions increased by 4 Bcf (compared to the 5-year average net withdrawal of 3 Bcf) and 12 Bcf (the 5-year average net injection of 5 Bcf), respectively, while the East region posted a decline of 12 Bcf (the 5-year average net withdrawal of 19 Bcf). In the Producing region, working natural gas inventories increased 6 Bcf (1.9 percent) in salt cavern facilities and rose 6 Bcf (0.6 percent) in nonsalt cavern facilities.

Temperatures during the storage report week were 0.4 degree cooler than the 30-year normal temperature and 3.6 degrees cooler than the same period last year. Temperatures in the Lower 48 states averaged 46.7 degrees, compared to 50.3 degrees last year and the 30-year normal of 47.1 degrees. While slightly below normal overall, temperatures varied somewhat across Census divisions. In the West, the Pacific and the Mountain Census divisions were relatively cool, averaging 3.3 and 3.1 degrees, respectively, cooler than the 30-year normal. The New England Census division in the Northeast and the West North Central Census division in the Midwest were relatively warm, each averaging 2.6 degrees warmer than the 30-year normal. Heating degree-days nationwide were 1.5 percent above normal and 22.4 percent above last year.

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See also:

• Natural Gas Analysis Reports
• Short-Term Energy Outlook