Natural Gas

Overview:

(For the Week Ending Wednesday, April 16, 2014)

• Although the Henry Hub spot price fell slightly from $4.66/MMBtu last Wednesday, April 9, to $4.62/MMBtu yesterday, natural gas spot prices rose somewhat at most market locations this week.
• At the New York Mercantile Exchange (Nymex), the price of the near-month futures contract fell slightly from $4.586/MMBtu last Wednesday to $4.530/MMBtu yesterday.
• Working natural gas in storage rose to 850 billion cubic feet (Bcf) as of Friday, April 11, according to the U.S. Energy Information Administration (EIA) Weekly Natural Gas Storage Report (WNGSR). A net storage injection of 24 Bcf for the week resulted in storage levels 50.0% below year-ago levels and 54.3% below the 5-year average.
• Active oil and natural gas drilling rigs totaled 1,831 as of April 11, an increase of 13 from the previous week, according to data from Baker Hughes Inc. The natural gas rig count decreased by 6 rigs to 310, while the number of oil-directed rigs rose by 19 from 1,498 to 1,517.
• The weekly average natural gas plant liquids composite price increased for the third week in a row. The composite price rose this week (covering April 7 through April 11) by 2.6%, and is now at $10.20/MMBtu. All five of the components of the composite price increased this week. Natural gasoline increased by 2.7%; ethane, 3.2%; propane, 3.2%; butane, 0.9%; and isobutane, 1.6%.

more summary data

Prices/Demand/Supply:

Outside of the Southeast, prices at most market locations rise. Henry Hub spot prices fell slightly from $4.66/MMBtu last Wednesday to $4.62/MMBtu yesterday, while other pricing points in the Southeast moved similarly. However, at most other locations around the country, overall price changes were small, with more small net gains than small net losses for the report week.

Northeast prices fall during warm weather, then rise. In the Northeast, prices had fallen below the Henry Hub spot price in many trading locations over the weekend. However, with unseasonably cool weather beginning Tuesday, April 15, prices went back up to end the week at a premium to the Henry Hub. At the Algonquin Citygate, which serves Boston consumers, prices traded at a $0.57/MMBtu discount to the Henry Hub on Friday. On Tuesday, prices at Algonquin Citygate were at a $2.10/MMBtu premium to the Henry Hub. The Northeast price increases were less pronounced outside of New England; at Transco Zone 6 NY, prices ended Tuesday at $4.75/MMBtu, an 8-cent premium to the Henry Hub. The Algonquin Citygate and Transco Zone 6 NY prices ended the report week on Wednesday at $5.55/MMBtu and $4.53/MMBtu, respectively.

Nymex declines slightly. The price of the near-month (May 2014) contract at the Nymex fell from $4.586/MMBtu last Wednesday to $4.530/MMBtu yesterday. The price of the 12-month strip (the 12 contracts between May 2014 and April 2015) fell from $4.650/MMBtu last Wednesday to $4.598/MMBtu yesterday.

Increased production boosts supply. According to Bentek data, overall supply rose 0.2% this week. This increase was largely due to a 0.3% increase in dry production week over week. Bentek noted that dry production of 68.0 Bcf on Sunday was an all-time record high. Pipeline imports of natural gas from Canada fell by 1.6% week over week, with declines in imports in the West and Northeast offsetting gains in the Midwest. LNG sendout declined slightly, but has been a minimal part of the supply picture for some time now.

Consumption falls. Decreases in residential and commercial consumption drove an overall 3.9% decline in U.S. demand. Residential and commercial consumption fell 10.5% as heating demand subsided. Consumption of gas for power generation rose 3.1%, likely the result of increased air-conditioning demand in the parts of the South that experienced summer-like weather over the weekend. Industrial consumption fell by 1.8% and exports to Mexico rose 3.6%.

more price data

Storage

Smaller-than-average injection accompanies mild weather. The net injection reported for the week ending April 11 was 24 Bcf, 13 Bcf smaller than the 5-year average net injection of 37 Bcf and 1 Bcf smaller than last year's net injection of 25 Bcf. Working gas inventories totaled 850 Bcf, 850 Bcf (50.0%) less than last year at this time, 1,010 Bcf (54.3%) below the 5-year (2009-13) average, and 777 Bcf (47.8%) below the 5-year observed minimum.

For the second straight week, storage build is lower than market expectations. Market expectations called for a build of 35 Bcf. When the EIA storage report was released at 10:30 a.m., the price for the May natural gas futures contract rose 17 cents to $4.69/MMBtu on the Nymex. Prices rose another 1 cent in the hour following the release.

Only the West region posts a larger-than-average build. The East, West, and Producing regions had net injections of 6 Bcf (12 Bcf smaller than its 5-year average injection of 18 Bcf), 8 Bcf (5 Bcf larger than its 5-year average injection of 3 Bcf), and 10 Bcf (7 Bcf smaller than its 5-year average injection of 17 Bcf), respectively. Storage levels for all three regions remain below their year-ago and 5-year average levels, and their 5-year minimums.

Temperatures during the storage report week warmer than normal. Temperatures in the Lower 48 states averaged 51.7 degrees for the week, 1.1 degrees warmer than the 30-year normal temperature and 1.3 degrees cooler than during the same period last year.

more storage data

See also:

• Natural Gas Analysis Reports
• Short-Term Energy Outlook