Natural Gas

Overview:

(For the Week Ending Wednesday, December 19, 2012)

• Natural gas prices fell modestly across the report week (Wednesday to Wednesday). The Henry Hub closed at $3.25 per million British thermal units (MMBtu) yesterday, down 8 cents for the week. Trading points in the Northeast saw more substantial price drops.
• The January 2013 New York Mercantile Exchange (Nymex) contract fell by 6.2 cents, from $3.382 per MMBtu last Wednesday to close at $3.320 per MMBtu yesterday. The near-month Nymex price is 7 cents above the Henry Hub price.
• Working natural gas in storage rose last week to 3,724 Bcf as of Friday, December 14, according to EIA's Weekly Natural Gas Storage Report (WNGSR). An implied storage withdrawal of 82 Bcf for the week moved storage levels 66 Bcf above year-ago levels, and 345 Bcf above the 5-year range.
• The Baker Hughes Incorporated natural gas rotary rig count stayed essentially flat, falling from 417 to 416 active rigs as of Friday, December 14. The oil-directed active rig count also decreased by a single unit, from 1,382 to 1,381.

more summary data

Prices:

Natural gas prices were down slightly across most market locations, falling more significantly in the Northeast. Henry Hub prices dipped from $3.33 per MMBtu last Wednesday to $3.25 yesterday, a decrease of 8 cents, or 2.4 percent. Many trading points fell by as much as 10 cents per MMBtu week-on-week, with the notable exception of the Northeast. Above-normal temperatures likely put downward pressure on prices, even in pipeline-constrained Boston. Prices at Algonquin Citygate, which serves Boston, fell by $1.58, from $5.81 per MMBtu last Wednesday to $4.23 yesterday. Transcontinental Pipeline's Zone 6 trading point (serving New York City markets) saw a 62 cent decrease, from $4.12 per MMBtu to $3.50 per MMBtu.

The Nymex futures price fell modestly week-on-week. The Nymex price fell 6 cents over the report period, from $3.382 per MMBtu last Wednesday to $3.320 per MMBtu yesterday, possibly reflecting expectations of mild weather and adequate supply. The near-month Nymex price ended 7 cents per MMBtu above the Henry Hub price. The 12-Month Strip (average of January 2013 to December 2013 contracts) also fell by 6.2 cents over the report period and ended the week at $3.320 per MMBtu. The 24-Month Strip is also trading below $4.00 per MMBtu, closing at $3.768 yesterday.

Many natural gas spot prices in 2012 were below Henry Hub. Reflecting high levels of natural gas production, ample natural gas stocks, and an expansive natural gas delivery system, many regional price bases, relative to Henry Hub, have flattened or were negative this year. So far in 2012, the average Henry Hub price was $2.73 per MMBtu. Malin, a trading point in southern Oregon, averaged 2 cents per MMBtu below Henry Hub, at $2.71 per MMBtu. Waha, in western Texas, was 5 cents below Henry Hub, averaging $2.68 per MMBtu. Areas with higher population-densities and pipeline constraints still faced elevated prices. Algonquin Citygate into Boston, for example, averaged $3.84 per MMBtu, $1.11 per MMBtu higher than Henry Hub.

Total demand for the report week was essentially flat. According to Bentek estimates, overall natural gas consumption for the nation fell by 0.2 percent. The residential/ commercial sector, which is the biggest gas-consuming sector during the winter, consumed 0.8 percent more gas week-on-week. This was offset by a 2.5 percent decrease in natural gas consumption in the electric power sector. Texas and the Midcontinent saw big drops in consumption for gas for power generation, falling 20.5 percent and 24.7 percent, respectively, likely driven by warmer average temperatures. The Northeast and the Southwest, both substantial consumers of gas for electric generation, consumed 6.3 percent and 10.1 percent more gas than the last report period, respectively, although net U.S. gas consumption in the electric sector was still down.

Total supply for the report week showed a slight increase. Bentek estimates an overall supply increase of 0.6 percent for the report period, driven by increased production. U.S. gross and dry natural gas production were up 0.7 percent week-on-week. Imports from Canada were up 0.6 percent. They increased most substantially in the West where temperatures in Oregon and Washington were low relative to the previous report period.

more price data

Storage

Working natural gas in storage decreased to 3,724 Bcf as of Friday, December 14, according to EIA's WNGSR. This represents an implied net withdrawal of 82 Bcf from the previous week, and is the fourth (and largest) withdrawal for this heating season. This week's net withdrawal was 62 Bcf smaller than the 5-year (2007-2011) average net withdrawal of 144 Bcf, and 18 Bcf smaller than last year's average net withdrawal of 100 Bcf. Inventories are currently 66 Bcf (1.8 percent) greater than last year at this time and 345 Bcf (10.2 percent) greater than the 5-year average.

All three storage regions posted declines this week. Inventories in the East, West, and Producing regions decreased by 49 Bcf (the 5-year average net withdrawal is 87 Bcf), 9 Bcf (the 5-year average net withdrawal is 20 Bcf), and 24 Bcf (the 5-year average net withdrawal is 36 Bcf), respectively. In the Producing region, working natural gas inventories decreased 8 Bcf (2.5 percent) in salt cavern facilities and decreased 17 Bcf (1.8 percent) in nonsalt cavern facilities.

Temperatures during the storage report week were 4.4 degrees warmer than the 30-year normal temperature and 4.7 degrees warmer than the same period last year. Temperatures in the Lower 48 states averaged 42.6 degrees, compared to 37.9 degrees last year and the 30-year normal of 38.1 degrees. During the week all regions were warmer than normal, particularly the South Atlantic and the East South Central Census divisions in the South, which, respectively, averaged 7.4 and 6.1 degrees warmer than the 30-year normal. The New England and Middle Atlantic Census divisions in the Northeast were also warm, averaging 6.0 and 5.9 degrees warmer, respectively, than the 30-year normal. In the Midwest, the East North Central Census division averaged 5.9 degrees warmer than the 30-year normal. Heating degree-days nationwide were 15.8 percent below normal and 16.7 percent below last year.

more storage data

See also:

• Natural Gas Analysis Reports
• Short-Term Energy Outlook