Natural Gas

Overview:

(For the Week Ending Wednesday, January 23, 2013)

• Natural gas prices in the Northeast increased significantly since last Friday, while natural gas prices at other major trading hubs increased moderately for the report week (Wednesday to Wednesday). Natural gas prices at Algonquin Citygate, for delivery into Boston and Transco Zone 6 New York increased from $8.98 per million British thermal units (MMBtu) and $5.92 per MMBtu last Wednesday to $31.32 per MMBtu and $35.33 per MMBtu yesterday, respectively. The Henry Hub daily spot price closed at $3.53 per MMBtu yesterday, up 10 cents per MMBtu for the week.
• The February 2013 New York Mercantile Exchange (Nymex) contract increased by 12 cents, from $3.435 per MMBtu last Wednesday to close at $3.554 per MMBtu yesterday.
• Working natural gas in storage declined to 2,996 Bcf as of Friday, January 18, according to the U.S. Energy Information Administration's (EIA) Weekly Natural Gas Storage Report (WNGSR). An implied storage withdrawal of 172 Bcf for the week moved storage levels 157 Bcf below year-ago levels, and 320 Bcf above the 5-year average.
• The Baker Hughes Incorporated natural gas rotary rig count decreased by 5 to 429 active units on the week ending January 18, 2013. The oil-directed rig count fell by 7 to 1,316 units. The oil rig count reached its lowest level since March 2012.

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Prices:

Regional average natural gas spot prices increased between 5 and 16 cents per MMBtu week-on-week, with the notable exception of pricing points located in the Northeast, which increased over $20.00 per MMBtu for the report week. The natural gas price bases (the difference between a regional price and the U.S. benchmark Henry Hub price) at trading points for New York and New England at the close of trading on Wednesday, January 23 reached their highest levels in over nine years.

Below-normal temperatures in the Northeast began earlier this week, drove up natural gas demand, and caused natural gas spot prices to spike in that region. On Tuesday, natural gas prices at Algonquin Citygate and Transco Zone 6 New York exceeded $20 per MMBtu, and increased to over $30 per MMBtu on Wednesday. Pipeline constraints in the Northeast often cause price spikes during peak demand periods in the winter. In addition to pipeline constraints, decreased LNG imports at Everett and decreased Canadian supplies from Canaport LNG and the Sable Offshore Energy Project in Eastern Canada have contributed to the supply and demand imbalance in New England during times of peak demand. For additional information on the effect of constraints in New England on natural gas prices this winter, see the supplement to the Short-Term Energy Outlook for January 2013.

The Nymex February futures price rose from $ 3.435 per MMBtu last Wednesday to $3.554 per MMBtu yesterday. During the week, the futures price spread over the Henry Hub daily spot price averaged between -7.2 cents and 5.4 cents per MMBtu. The 12-Month Strip (average of February 2013 to January 2014 contracts) gained 12 cents per MMBtu, starting at $3.654 per MMBtu last Wednesday and landing at $3.774 per MMBtu yesterday.

According to estimates from BENTEK Energy LLC (Bentek), average natural gas consumption for the nation rose this report week by 9.1 percent over last week's daily average. Below-normal temperatures across the United States contributed to the natural gas demand increase. The rise resulted principally from a 17 percent week-on-week increase in average residential/commercial consumption.

Consumption particularly rose in the Northeast. On January 22, natural gas consumption in the Northeast increased to 33.6 billion cubic feet per day (Bcf/d), 56 percent above the previous week's (January 14-January 20) seven-day average of 21.6 Bcf/d, according to data from Bentek. On January 23, Bentek reported that Northeast consumption rose to 36.2 Bcf/d, or 68 percent above the seven-day average. For both of these days, consumption in New York City rose to over 4.1 Bcf/d, or 41 percent above the 30-day average of 2.9 Bcf/d. Consumption in New England was just under 5.0 Bcf/d on January 22, and just under 5.1 Bcf/d on January 23, almost 22 percent above its 30-day average of 4.2 Bcf/d.

The increase in U.S. residential/commercial consumption, coupled with the slight increase for industrial consumption that Bentek estimated for the week, far exceeded the 2.5 percent drop in power sector consumption below last week's daily average. Power burn fell most significantly in the Southwest and Texas.

Bentek estimates that the average daily natural gas supply for this report week increased modestly by 1.9 percent over the previous week's daily average. This resulted from around 27 percent and 17 percent increases in imports from Canada and as LNG, respectively. Imports from Canadian and LNG imports are 8.5 percent higher and 48 percent lower than last year's levels during the same period, respectively. Dry natural gas production stayed unchanged from the previous week.

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Storage

Working natural gas in storage decreased to 2,996 Bcf as of Friday, January 18, according to EIA's WNGSR. This represents an implied net withdrawal of 172 Bcf from the previous week. This week's net withdrawal was 4 Bcf smaller than the 5-year average net withdrawal of 176 Bcf, and 10 Bcf larger than last year's average net withdrawal of 162 Bcf. Inventories are currently 157 Bcf (5.0 percent) less than last year at this time and 320 Bcf (12.0 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 80 Bcf (the 5-year average net withdrawal is 106 Bcf), 39 Bcf (the 5-year average net withdrawal is 18 Bcf), and 53 Bcf (the 5-year average net withdrawal is 51 Bcf), respectively. In the Producing region, working natural gas inventories decreased 15 Bcf (5.4 percent) in salt cavern facilities and decreased 37 Bcf (4.4 percent) in nonsalt cavern facilities.

Temperatures during the storage report week were 4.9 degrees warmer than the 30-year normal temperature and 1.6 degrees warmer than the same period last year. Temperatures in the Lower 48 states averaged 37.9 degrees, compared to 36.3 degrees last year and the 30-year normal of 33.0 degrees. While overall temperatures were a few degrees warmer than normal, temperatures varied significantly across Census divisions. The South Atlantic Census division in the South and the New England Census division in the Northeast were particularly warm, averaging 14.7 and 12.0 degrees warmer, respectively, than the 30-year normal. In the West, the Mountain and Pacific Census divisions were relatively cool, averaging 10.6 and 7.1 degrees cooler, respectively, than the 30-year normal. Heating degree-days nationwide were 14.6 percent below normal and 4.5 percent below last year.

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See also:

• Natural Gas Analysis Reports
• Short-Term Energy Outlook