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Natural Gas Weekly Update

for week ending November 5, 2014   |  Release date:  November 6, 2014   |  Next release:  November 13, 2014   |   Previous weeks

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

In the News:

Gas production growth, moderate consumption yield strong storage injections

Working natural gas inventories reached 3,571 billion cubic feet (Bcf) on October 31, representing a record summer injection of 2,749 Bcf, based on data released by the U.S. Energy Information Administration (EIA) this morning. At the start of the natural gas injection season, which is traditionally defined as April 1 through October 31, storage inventories totaled 826 Bcf. This was the lowest that natural gas storage had been since April 2003 and less than half the April 2013 start-point of 1,675 Bcf. But for each of the past 28 weeks, injections into storage have exceeded their five-year averages.

Notably, net injections into storage may not be over. EIA started surveying weekly storage changes (as opposed to just monthly tallies) 11 years ago, and in every year since then, net injections have continued into November. In two of those years, stocks at the end of November were greater than those on October 31. Some analysts now suggest that stocks could continue rising for another two weeks.

A combination of factors supported record injections over the past seven months, enabling storage levels as of October 31 to move within 6.8% of the five-year (2009-13) average. The two primary factors are this year's record high natural gas production and generally mild summer and early fall weather, which reduced the volume of natural gas used for electricity generation (power burn) for air conditioning and heating.

Natural gas production: Natural gas production averaged 68.5 Bcf/day in the 2014 injection season, according to data from Bentek Energy. This is 3.6 Bcf/day higher than average production in 2013 (64.9 Bcf/day) and 8.3 Bcf/day higher than the five-year (2009-13) average (60.2 Bcf/day), over the same period. Natural gas production set and reset several records over the injection season, most recently reaching 70.9 Bcf/day on October 24.

Increased natural gas production from shale plays is the major contributor to this production growth. In the first six months of the 2014 injection season (April through September, the most current EIA data available), production from shale plays averaged 36.4 Bcf/day, an increase of 15% over the same period in the previous year. Growth in the Marcellus Shale, located primarily in Pennsylvania and West Virginia, has been a key contributor. Natural gas produced in the Marcellus has doubled since 2012, and grew by nearly one-third on average from April through September this year over the same period last year, to 13.0 Bcf/day.

Power burn: The power sector is typically the largest consuming sector of natural gas during the summer injection season, in support of increased cooling load. On average, temperatures were milder this year than last year, with a decrease of nearly 4% in U.S. cooling degree days, leading to an overall average decrease of 0.4 Bcf/day of natural gas power burn compared to the 2013 injection season. This overall decline in power burn was driven by decreases in Texas and the Midwest, which experienced cooler-than-normal temperatures leading to power burn declines of more than 0.5 Bcf/day compared with last year.

Power burn did increase modestly in other regions of the country, such as the Southeast and the Northeast. In the Southeast, warmer weather compared to last year factored into a marginal increase in power burn. Several factors may have contributed to an increase in power burn in the Northeast including extended periods of extremely low natural gas prices in that region during the injection season, as well as the retirements of coal-fired power plants. Since September 2013, there have been almost three gigawatts of capacity retired at coal-fired power plants in the Northeast. More than two gigawatts of these retirements occurred in Pennsylvania between September and December 2013. Most of the remainder came from the retirement of Dominion's Salem Harbor coal- and oil- fired generation plant in Massachusetts in June.

Despite the overall decrease in power burn, total natural gas consumption increased by 0.3 Bcf/day during the 2014 injection season compared to 2013, with increases in both U.S. exports to Mexico and industrial consumption. Increased natural gas production dwarfed this increase in consumption, leading to higher levels of natural gas storage injections.

Overview:

(For the Week Ending Wednesday, November 5, 2014)

  • Spot prices rose at most market locations during the report week (Wednesday to Wednesday), as parts of the country experienced their first taste of winter weather. The Henry Hub spot price rose from $3.56 per million British thermal unit (MMBtu) last Wednesday, October 29, to $3.80/MMBtu yesterday, November 5.
  • At the New York Mercantile Exchange (Nymex), the December 2014 contract moved into the front-month slot as November expired last Wednesday. The December contract rose over the week, beginning at $3.788/MMBtu last Wednesday and ending at $4.194/MMBtu yesterday.
  • Working natural gas in storage rose to 3,571 billion cubic feet (Bcf) as of Friday, October 31, according to the U.S. Energy Information Administration (EIA) Weekly Natural Gas Storage Report (WNGSR). A net increase in storage of 91 Bcf for the week resulted in storage levels 6.2% below year-ago levels and 6.8% below the five-year average for this week.
  • The total U.S. rotary rig count for the week ending October 31 increased by 2 units to 1,929 rigs, according to data from Baker Hughes Inc. The natural gas rig count increased by 14 units to 346, while oil rigs fell by 13 units to 1,582, and 1 rig categorized as miscellaneous was added. The natural gas rig count has now risen for three consecutive weeks, adding a total of 26 rigs since October 10, and this week's 14-rig increase is the largest in more than a year. However, natural gas rigs remain 14 units less than year-ago levels, while oil rigs are 206 units greater than last year's level.
  • The Mont Belvieu natural gas plant liquids composite price increased by 2.2% to $8.31/MMBtu for the week of October 27 - 31. The price of natural gasoline declined by 0.2%, while the other component prices increased. Ethane, propane, isobutane, and butane increased by 1.7%, 3.1%, 3.4%, and 3.8%, respectively.

more summary data

Prices/Demand/Supply:

Prices rise on colder weather. Natural gas prices rose at most market locations this week, as New England and some Southern states experienced early winter weather. The Henry Hub spot price rose 24 cents from $3.56/MMBtu last Wednesday to $3.80/MMBtu yesterday. The Algonquin Citygate, which serves Boston, began the week at $4.03/MMBtu and rose to $6.64/MMBtu on Friday on forecasts for a cold, snowy weekend in New England. The price dropped back to $4.06/MMBtu at the end of the report week as temperatures moderated.

Mid-Atlantic prices rise overall. The Mid-Atlantic region also experienced cold weather, with snow in North Carolina and South Carolina, and prices posted overall gains for the week. Transcontinental Pipeline's Zone 6 trading point for delivery to New York City rose on the week from $2.66/MMBtu last Wednesday to $3.28/MMBtu yesterday. Prices at Transco's Zone 5 trading regions, which serves consumers from South Carolina to Virginia, rose from $3.59/MMBtu last Wednesday to $3.77/MMBtu yesterday.

Working natural gas in storage rose to 3,571 (Bcf) as of Friday, October 31, according to the U.S. Energy Information Administration (EIA) Weekly Natural Gas Storage Report (WNGSR). A net increase in storage of 91 Bcf for the week resulted in storage levels 6.2% below year-ago levels and 6.8% below the five-year average for this week.

New pipelines begin service. New pipeline expansions will add 1.3 bilion cubic feet per day (Bcf/d) of takeaway capacity from the Marcellus and Utica regions in November, according to Bentek. This may result in additional production coming out of the Northeast. One of the projects, Columbia's West Side, began partial service earlier this month, and will allow 0.4 Bcf/d to be transported from western Pennsylvania and West Virginia to the Gulf region. Texas Eastern has about 2 Bcf/d of reversal or bidirectional projects to take Marcellus and Utica gas to market areas through 2017. The 0.3 Bcf/d Texas Eastern Appalachian to Market (TEAM) south expansion came online September 1, two months ahead of its November 1 start date. The 0.6 Bcf/d TEAM 2014, a related project, is expected to be fully operational this month. TEAM South links dry Marcellus gas with the Gulf region; TEAM 2014 links gas from western Pennsylvania and West Virginia with the Northeast, Midwest, and South.

Most Marcellus-area prices this week increased substantially. At Dominion's South trading point prices rose from $2.45/MMBtu last Wednesday to $3.19/MMBtu yesterday. Similarly, prices on Tennessee's Zone 4 Marcellus location rose from $2.15/MMBtu to $2.76/MMBtu.

Marcellus prices remain low. Prices at Marcellus trading points fluctuated during the report week, decreasing by Friday in anticipation of lower weekend demand. Prices rebounded on Monday and ended the report week 3% lower on Tennessee Zone 4 Marcellus and Millennium East Pool, at $2.15/MMBtu and $2.34/MMBtu, respectively.

Supply remains flat, demand increases substantially. Dry production remained flat this week, but is 7.1% greater than the same week last year, according to Bentek Energy data. Imports of natural gas from Canada increased slightly, while LNG sendout remained minimal. On the demand side, residential consumption increased 41.1% from last week, reflecting winter weather and low temperatures in the 20s and 30s through much of the country. Residential and commercial consumption rose to a weekly high of 30.5 Bcf on Saturday, the highest level since April, before dropping back as temperatures moderated in the end half of the report week. Industrial consumption rose 4.9%, and consumption of natural gas for electric power generation dropped 10.2%.

December becomes front-month contract. The November futures contract expired last Wednesday, having gained 42.6 cents during its tenure as the near-month contract. Most of these gains were concentrated in the final week of October. The December contract rose from $3.788/MMBtu last Wednesday to $4.194/MMBtu yesterday. Unsurprisingly, the highest prices of the 12-month strip are for the December 2014 through March 2015 period. The April 2015 contract settled at $3.810/MMBtu yesterday, compared to $4.167/MMBtu for the March 2015 contract.

more price data

Storage

Net injection more than doubles the five-year average. The net injection reported for the week ending October 31 was 91 Bcf, 49 Bcf larger than the five-year average net injection of 42 Bcf and 56 Bcf larger than last year's net injection of 35 Bcf. Working gas inventories totaled 3,571 Bcf, 238 Bcf (6.2%) less than last year at this time and 261 Bcf (6.8%) below the five-year (2009-13) average.

Storage build is larger than expectations. Market expectations called for an average build of 86 Bcf. When the EIA storage report was released at 10:30 a.m., the price for the December natural gas futures contract fell 4 cents to $4.12/MMBtu in trading on the Nymex, but recovered minutes later at around $4.15.

Since the start of April, the United States has added a record 2,749 Bcf of natural gas to storage. This is significantly higher than the net storage injection of 2,109 over the same period last year, and 2,018 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 October 31 was $4.20/MMBtu, 12% higher than the average value for the same 31 weeks last year of $3.76/MMBtu. The highest winter-month Nymex price (for the January 2015 contract) in trading for the week ending on October 31 averaged $3.84/MMBtu. This is 14 cents more than the current front month Nymex contract price for that week. A year ago, the difference was 33 cents/MMBtu.

All regions post larger-than-average builds. The East, West, and Producing regions had net injections of 43 Bcf (23 Bcf larger than its five-year average), 8 Bcf (4 Bcf larger than its five-year average), and 40 Bcf (22 Bcf larger than its five-year average), respectively. Storage levels for all three regions remain below their year-ago and five-year average levels.

Temperatures during the storage report week were much warmer than the 30-year average. Temperatures in the Lower 48 states averaged 57.6 degrees for the week, 5.1 degrees warmer than the 30-year normal temperature and 7.6 degrees warmer than during the same period last year. There were nine population-weighted cooling degree days during the storage report week, three more than the 30-year normal and three more than the same period last year. There were also 61 population-weighted heating degree days during the storage report week, 33 less than the 30-year normal and 50 less than the same period last year.

more storage data

See also:




Natural gas spot prices
Spot Prices ($/MMBtu)
Thu,
30-Oct
Fri,
31-Oct
Mon,
03-Nov
Tue,
04-Nov
Wed,
05-Nov
Henry Hub
3.74
3.80
3.72
3.66
3.80
New York
2.81
2.76
2.65
2.83
3.28
Chicago
4.11
3.87
3.77
3.72
4.03
Cal. Comp. Avg,*
3.95
3.88
3.81
3.78
4.00
Futures ($/MMBtu)
December Contract
3.827
3.873
4.046
4.129
4.194
January Contract
3.906
3.959
4.145
4.226
4.287
*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: (10/29/14 - 11/5/14)
Percent change for week compared with:
 
last year
last week
Gross Production
7.16%
0.02%
Dry Production
7.09%
0.02%
Canadian Imports
16.18%
1.21%
      West (Net)
24.67%
0.56%
      MidWest (Net)
21.31%
-11.45%
      Northeast (Net)
-57.94%
-188.66%
LNG Imports
-77.07%
7.84%
Total Supply
7.44%
0.11%
Source: BENTEK Energy LLC
U.S. Consumption - Gas Week: (10/29/14 - 11/5/14)
Percent change for week compared with:
 
last year
last week
U.S. Consumption
3.4%
10.5%
Power
-0.8%
-10.2%
Industrial
2.0%
4.9%
Residential/Commercial
8.0%
41.1%
Total Demand
3.2%
10.1%
Source: BENTEK Energy LLC
Natural gas supply


Weekly natural gas rig count and average Henry Hub
Rigs
Fri, October 31, 2014
Change from
 
last week
last year
Oil Rigs
1,582
-0.82%
14.97%
Natural Gas Rigs
346
4.22%
-3.89%
Miscellaneous
1
0.00%
-83.33%
Rig Numbers by Type
Fri, October 31, 2014
Change from
 
last week
last year
Vertical
365
1.11%
-10.54%
Horizontal
1,353
-0.15%
22.55%
Directional
211
0.00%
-8.26%
Source: Baker Hughes Inc.


Working Gas in Underground Storage
Stocks
billion cubic feet (bcf)
Region
2014-10-31
2014-10-24
change
East
1,956
1,913
43
West
498
490
8
Producing
1,117
1,077
40
Total
3,571
3,480
91
Source: U.S. Energy Information Administration
Working Gas in Underground Storage
Historical Comparisons
Year ago
(10/31/13)
5-year average
(2009-2013)
Region
Stocks (Bcf)
% change
Stocks (Bcf)
% change
East
1,973
-0.9
2,063
-5.2
West
555
-10.3
528
-5.7
Producing
1,282
-12.9
1,241
-10.0
Total
3,809
-6.2
3,832
-6.8
Source: U.S. Energy Information Administration


Temperature -- Heating & Cooling Degree Days (week ending Oct 30)
 
HDD deviation from:
 
CDD deviation from:
Region
HDD Current
normal
last year
CDD Current
normal
last year
New England
93
-32
-65
0
0
0
Middle Atlantic
79
-36
-62
0
0
0
E N Central
91
-34
-67
0
-1
0
W N Central
86
-42
-66
3
2
3
South Atlantic
45
-24
-51
16
-3
2
E S Central
43
-26
-45
5
1
3
W S Central
10
-24
-19
37
19
11
Mountain
71
-49
-31
14
9
7
Pacific
22
-29
-32
4
1
4
United States
61
-33
-50
9
3
3
Note: HDD = heating degree-day; CDD = cooling degree-day

Source: National Oceanic and Atmospheric Administration

Average temperature (°F)

7-Day Mean ending Oct 30, 2014

Mean Temperature (F) 7-Day Mean ending Oct 30, 2014

Source: NOAA/National Weather Service

Deviation between average and normal (°F)

7-Day Mean ending Oct 30, 2014

Mean Temperature Anomaly (F) 7-Day Mean ending Oct 30, 2014

Source: NOAA/National Weather Service