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Natural Gas Weekly Update

for week ending July 9, 2014   |  Release date:  July 10, 2014   |  Next release:  July 17, 2014   |   Previous weeks

JUMP TO: In The News | Overview | Prices/Supply/Demand | Storage

In the News:

Hurricanes pose less danger to natural gas production in recent years

On the morning of Thursday, July 3, the center of Hurricane Arthur formed off the coast of North Carolina before skirting up the coast of the Mid-Atlantic and northeastern states on Friday. Arthur had minimal effects on natural gas infrastructure and, unlike hurricanes that travel through the Gulf of Mexico, no effects on natural gas production. U.S. dry natural gas production reached its third-highest recorded level on Friday of 68.6 billion cubic feet (Bcf), according to data from Bentek Energy.

In recent years, the effect of hurricanes on U.S. natural gas production has diminished. Only one of the last six largest daily decreases in U.S. dry natural gas production since December 2008 has occurred during the June-November hurricane season, with the other five taking place during winter months, between December and March (see graph above). The diminishing impact of hurricanes on natural gas production in recent years owes partially to relatively low levels of hurricane strength and trajectory over Gulf production areas. Another key contributor is the Gulf's declining share of U.S. natural gas production, which has reduced the potential effect of hurricanes on production.

With decreasing Gulf output and increasing amounts of natural gas production from inland basins — largely from shale plays—the Gulf of Mexico's share of total U.S. marketed natural gas production declined to under 5% during the first four months of 2014 from more than 25% in the late 1990s, according to data from EIA's Natural Gas Monthly. Increasingly, U.S. natural gas supply has come from onshore production areas that are relatively less vulnerable to supply disruptions from hurricanes, and more vulnerable to wellhead freeze-offs during winter months.

This was apparent during the first seven days in January of this year, when bitterly cold temperatures caused U.S. dry natural gas production to drop by 5.2 Bcf/d, from 66.7 Bcf on December 31, 2013, to 61.5 Bcf on January 7, 2014. Production dropped by 2.4 Bcf on January 7 alone, the highest daily decrease in almost three years, with widespread freeze-offs reported in the Fayetteville Shale in Arkansas and the Marcellus Shale in northeast Pennsylvania, in addition to production declines in the Haynesville Shale in Texas and Louisiana. Widespread freeze-offs were also reported in multiple basins in the southwestern United States when that part of the country experienced a cold snap in early December.

By contrast, the United States has not experienced significant disruptions to production from hurricanes since 2008, when Hurricane Gustav and Hurricane Ike made landfall in September of that year. The expectation is for this trend to continue during a relatively quiet 2014 Atlantic hurricane season, with production shut-ins expected to remain low, despite increasing over last year, when only three hurricanes occurred, none of which was major.

Overview:

(For the Week Ending Wednesday, July 9, 2014)

  • Natural gas prices decreased during the report week (Wednesday, July 2 — Wednesday, July 9) at most market locations for the third week in a row. The Henry Hub spot price decreased from $4.39 per million British thermal units (MMBtu) last Wednesday to $4.15/MMBtu yesterday.
  • At the New York Mercantile Exchange (Nymex), the August 2014 contract began the report week on July 2 at $4.357/MMBtu, decreasing to $4.170/MMBtu by the end of trading yesterday, an 18.7-cent/MMBtu decline. The price of the 12-month strip also decreased, from $4.289/MMBtu last Wednesday to $4.152/MMBtu yesterday.
  • Working natural gas in storage rose to 2,022 Bcf as of Friday, July 4, according to the U.S. Energy Information Administration (EIA) Weekly Natural Gas Storage Report (WNGSR). A net increase in storage of 93 Bcf for the week resulted in storage levels 24.4% below year-ago levels and 27.6% below the 5-year average.
  • The Baker Hughes rotary rig count increased week-over-week by 1 rig, to 1,874 as of July 3. The number of active natural gas-directed rigs decreased by 3, after increasing the previous two weeks. The number of oil-directed rigs increased by 4, with 7 oil-directed rigs added in the Permian Basin in West Texas and southeastern New Mexico, where six formations have contributed to a surge in crude oil production, and a 3—rig decrease in the rest of the United States. The number of oil—directed rigs has increased by 184 in the past 6 months, from 1,378 on January 3, to 1,562 on July 3, while the number of gas—directed rigs has decreased by 61 over this period, from 372 to 311.
  • The average daily Mont Belvieu, Texas, natural gas plant liquids composite price for the week covering June 30 to July 4 decreased by 20 cents/MMBtu (1.9%) compared to last week (June 23—27), to $9.99/MMBtu. Prices declined for propane, butane, isobutene, and natural gasoline, by 2.6%, 1.5%, 2.1%, and 2.3%, respectively. The ethane price increased by 0.4%.

more summary data

Prices/Demand/Supply:

Prices decrease throughout the country. The average daily Henry Hub spot price continually decreased during the report week, from $4.39/MMBtu on July 2 to $4.15/MMBtu yesterday, its lowest point in 7 months, as temperatures cooled. Prices at most other locations in the United States also decreased through the report week.

Northeast prices drop significantly. While prices in most markets decreased gradually over the report week, average daily natural gas spot prices in New England, New York, and the Mid-Atlantic dropped significantly Thursday before a temperate Independence Day weekend. On Monday prices recovered, before declining again through Tuesday and yesterday.

At the Algonquin Citygate, which serves Boston-area consumers, the spot price was $3.11/MMBtu last Thursday. The average spot prices at Transco Zone 6-New York and at Tetco-M3, which serves consumers in the Mid-Atlantic, both decreased on that day to their lowest levels in more than two years, to $2.36/MMBtu and $2.42/MMBtu, respectively. The spot prices in these locations reflected mild holiday weekend temperatures in the Northeast and Mid-Atlantic regions, which caused demand for gas used for electric generation (power burn) to decrease.

Nymex decreases this week. The price of the August 2014 natural gas futures contract began the report week on July 2 by settling at $4.357/MMBtu. It traded up to $4.406/MMBtu last Thursday, before decreasing by 18.1 cents/MMBtu, to $4.225/MMBtu on Monday. The August 2014 price continued to decrease through yesterday, when it settled at $4.170/MMBtu.

Production decrease drives total supply decline. Average total supply decreased this week to 73.2 Bcf/d, 0.3 Bcf/d (0.4%) below last week's record average of 73.5 Bcf/d. This ended three consecutive weeks of increases in total U.S. supply. Dry production decreased to 68.4 Bcf/d, 0.2 Bcf/d (0.3%) below last week's record average of 68.5 Bcf/d. Dry production reached its third highest recorded level on July 4, of 68.6 Bcf, before declining through yesterday. Average net pipeline imports from Canada decreased slightly, while liquefied natural gas (LNG) sendout increased slightly.

Consumption decreases due to lower power burn. Total U.S. natural gas consumption averaged 58.7 Bcf/d this week, 1.5 Bcf/d (2.3%) lower than last week. There was a corresponding decline in power burn of 1.6 Bcf/d (5.9%), with the average power burn for the week averaging 25.5 Bcf/d. The Northeast, Midwest, and Southeast regions registered decreases of 0.6 Bcf/d, 0.7 Bcf/d, and 0.8 Bcf/d, respectively, as temperatures cooled into the 60s and 70s in these regions through the weekend. This was partially offset by smaller power burn increases in regions farther west. Industrial consumption and net pipeline exports to Mexico both increased slightly over last week's average.

more price data

Storage

Inventory build is greater than average. The net injection reported for the week ending July 4 was 93 Bcf, 21 Bcf larger than the 5-year average net injection of 72 Bcf and 13 Bcf larger than last year's net injection of 80 Bcf. Working gas inventories totaled 2,022 Bcf, 653 Bcf (24.4%) less than last year at this time, and 769 Bcf (27.6%) below the 5-year (2009-13) average.

Storage build is higher than market expectations. Market expectations called for a build of 91 Bcf. When the EIA storage report was released at 10:30 a.m., the price for the August natural gas futures contract decreased 5 cents to $4.11/MMBtu on the Nymex.

From the week ending on April 4 to the week ending on July 4, net storage injections have totaled 1,200 Bcf, versus 975 Bcf for the same 14 weeks in 2013, and 977 Bcf for these weeks between 2009 and 2013, on average. The average unit value of what storage holders put into storage from April 4 to July 4 was $4.58/MMBtu, 16% higher than the average value for the same 14 weeks last year of $3.96/MMBtu. The highest winter-month Nymex price (for the January 2015 contract) in trading for the week ending on July 4 averaged $4.55/MMBtu. This was 14 cents more than the current Nymex August contract price. A year ago, the difference was 25 cents/MMBtu.

There are currently 17 more weeks in the injection season, which traditionally occurs April 1 through October 31, although, in many years, injections continue into November. EIA forecasts that the end-of-October working natural gas inventory level will be 3,431 Bcf, which, as of July 4, would require an average injection of 83 Bcf per week through the end of October. EIA's forecast for the end-of-October inventory levels are below the 5-year (2009-13) average value of 3,837 Bcf. To reach the 5-year average by October 31, average weekly injections through the end of October would need to be 107 Bcf.

All three regions post larger-than-average builds. The East, West, and Producing regions had net injections of 56 Bcf (7 Bcf larger than its 5-year average injection), 14 Bcf (5 Bcf larger than its 5-year average injection), and 23 Bcf (9 Bcf larger than its 5-year average injection), respectively. Storage levels for all three regions remain below their year-ago and 5-year average levels.

Temperatures during the storage report week were warmer than normal. Temperatures in the Lower 48 states averaged 75.7 degrees for the week, 1.9 degree warmer than the 30-year normal temperature and 0.1 degree cooler than during the same period last year.

more storage data

See also:



Natural gas spot prices
Spot Prices ($/MMBtu)
Thu,
3- Jul
Fri,
4-Jul
Mon,
7-Jul
Tue,
8-Jul
Wed,
9-Jul
Henry Hub
4.29
Holiday
4.25
4.16
4.15
New York
2.36
Holiday
3.87
3.14
2.95
Chicago
4.34
Holiday
4.35
4.26
4.26
Cal. Comp. Avg,*
4.53
Holiday
4.57
4.49
4.50
Futures ($/MMBtu)
August Contract
4.357
Holiday
4.225
4.204
4.163
September Contract
4.395
Holiday
4.219
4.194
4.158
*Avg. of NGI's reported prices for: Malin, PG&E citygate, and Southern California Border Avg.
Source: NGI's Daily Gas Price Index
Natural gas futures prices
Natural gas liquids spot prices


U.S. Natural Gas Supply - Gas Week: (7/2/14 - 7/9/14)
Percent change for week compared with:
 
last year
last week
Gross Production
4.73%
-0.27%
Dry Production
4.69%
-0.27%
Canadian Imports
-10.49%
-2.38%
      West (Net)
-21.59%
2.23%
      MidWest (Net)
20.86%
-3.27%
      Northeast (Net)
-85.97%
-59.06%
LNG Imports
-70.15%
7.58%
Total Supply
3.17%
-0.39%
Source: BENTEK Energy LLC
U.S. Consumption - Gas Week: (7/2/14 - 7/9/14)
Percent change for week compared with:
 
last year
last week
U.S. Consumption
-2.5%
-2.6%
Power
-8.8%
-5.9%
Industrial
2.9%
0.8%
Residential/Commercial
5.2%
0.1%
Total Demand
-1.5%
-2.3%
Source: BENTEK Energy LLC
Natural gas supply


Weekly natural gas rig count and average Henry Hub
Rigs
Fri, July 04, 2014
Change from
 
last week
last year
Oil Rigs
1,562
0.26%
11.97%
Natural Gas Rigs
311
-0.96%
-12.39%
Miscellaneous
1
0.00%
-85.71%
Rig Numbers by Type
Fri, July 04, 2014
Change from
 
last week
last year
Vertical
384
0.79%
-11.52%
Horizontal
1,268
0.40%
18.73%
Directional
222
-3.06%
-12.94%
Source: Baker Hughes Inc.


Working Gas in Underground Storage
Stocks
billion cubic feet (bcf)
Region
2014-07-04
2014-06-27
change
East
979
923
56
West
345
331
14
Producing
698
675
23
Total
2,022
1,929
93
Source: U.S. Energy Information Administration
Working Gas in Underground Storage
Historical Comparisons
Year ago
(7/4/13)
5-year average
(2009-2013)
Region
Stocks (Bcf)
% change
Stocks (Bcf)
% change
East
1,236
-20.8
1,338
-26.8
West
445
-22.5
436
-20.9
Producing
994
-29.8
1,018
-31.4
Total
2,675
-24.4
2,791
-27.6
Source: U.S. Energy Information Administration


Temperature -- Heating & Cooling Degree Days (week ending Jul 03)
 
HDD deviation from:
 
CDD deviation from:
Region
HDD Current
normal
last year
CDD Current
normal
last year
New England
1
-2
1
54
25
-1
Middle Atlantic
0
-1
0
71
27
5
E N Central
4
2
-3
60
13
23
W N Central
7
2
3
50
-11
0
South Atlantic
0
0
0
104
15
11
E S Central
0
0
0
91
5
14
W S Central
0
0
0
116
0
-1
Mountain
3
-8
3
79
9
-31
Pacific
2
-6
2
50
16
-43
United States
2
-1
0
77
12
-1
Note: HDD = heating degree-day; CDD = cooling degree-day

Source: National Oceanic and Atmospheric Administration

Average temperature (°F)

7-Day Mean ending Jul 03, 2014

Mean Temperature (F) 7-Day Mean ending Jul 03, 2014

Source: NOAA/National Weather Service

Deviation between average and normal (°F)

7-Day Mean ending Jul 03, 2014

Mean Temperature Anomaly (F) 7-Day Mean ending Jul 03, 2014

Source: NOAA/National Weather Service