In the News:
Russian and Norwegian natural gas pipeline exports to Europe increase over the summer amid lower prices
Natural gas pipeline exports to Europe from Russia and Norway, two of its largest suppliers, have steadily increased over the summer as European countries accelerated the refill of storage inventories. European countries have injected a record 1,834 Bcf from April 1 through September 22, amid the lowest natural gas prices since 2009. Combined Russian and Norwegian exports to Europe increased by 8% in the second quarter of 2015 over first quarter levels. This was driven by a 58% increase in exports from Russia over this period, with Russian natural gas pipeline prices at German border averaging $7.35 per Million British Thermal Units (MMBtu), compared to $9.36/MMBtu, on average, in the first three months of this year. Prices declined further to $6.66/MMBtu in August, as oil-linked contractual natural gas prices began to reflect declines in crude oil prices.
The sharp decline in crude oil prices between August 2014 and January 2015 had a significant effect on European natural gas markets, where most natural gas trade is based on long-term contracts linked to crude oil or petroleum product prices, lagged three to nine months. As the North Sea Brent crude oil price declined to $47.76 per barrel in January 2015, a more than 50% decline from August 2014, European buyers began to optimize their oil-indexed contracts by decreasing imports in the winter while drawing heavily on gas in storage in anticipation of lower natural gas prices in the spring and summer 2015.
Going into the winter of 2014-15, Russian exports to Europe were at record low levels, 22% below the five-year (2010-14) average. The exports declined even further to 6.4 billion cubic feet per day (Bcf/d) in January and 5.3 Bcf/d in February, a 36% and 40% decline from the five-year (2010-14) average for these months, according to EIA calculations of data published by the International Energy Agency (IEA).
Since March, Russian exports increased and remained at high levels into the summer. As of July, the most recent monthly data available, Russian exports averaged 11.9 Bcf/d. While Russian exports transiting Ukraine on the Brotherhood pipeline have been decreasing, exports on Nord Stream pipeline into Germany hit record high levels this year, increasing by 55% and 59% in June and July, respectively, compared with the same months last year. The German border price for Russian gas declined by more than 30% in April-August 2015 compared with last year.
Natural gas pipeline exports from Norway increased by 4% in the second quarter of 2015, compared with the same period last year, and averaged 9% higher year-on-year in January-July 2015, according to IEA data. Additional imports from Norway are offsetting declines in imports from the Netherlands. A further government limit on the Netherlands Groningen field production implies a maximum 2015 production of 30 billion cubic meters (Bcm) (1,059 Bcf), a 12.5 Bcm (441 Bcf) reduction from the previous cap announced in 2014.
Storage inventories in Europe have been filling up at a rapid pace over the summer and currently stand at 2,578 Bcf, according to data by Gas Infrastructure Europe. The injections between April 1 and September 22 of 1,834 Bcf have been the highest of the 2010-15 period, surpassing the previous 2013 record of 1,625 Bcf in this period. High export volumes from Russia and Norway are expected to continue in the remaining few weeks of the injection season, supported by lower natural gas prices, both spot and contract, which are expected to be sustained at current levels in the next few months.
Overview:
(For the Week Ending Wednesday, September 23, 2015)
- Natural gas prices declined in most market locations across the country over the report week (Wednesday, September 16, through Wednesday, September 23), with changes remaining relatively small. The Henry Hub spot price began the week at $2.68 per million British thermal units (MMBtu) last Wednesday and ended the week at $2.59/MMBtu.
- At the New York Mercantile Exchange (Nymex), the price of the near-month futures contract (October 2015) began the report week at $2.660/MMBtu and ended the report week down at $2.569/MMBtu yesterday.
- Working natural gas in storage increased to 3,440 Bcf as of Friday, September 18. The net injection into storage by 106 Bcf for the week resulted in storage levels 16% above a year ago and 5% above the five-year average for this week.
- The total oil and natural gas rig count fell by 6 from the previous week, with 842 units in service for the week ending Friday, September 18. This was 1,089 rigs below the same week in 2014, according to data from Baker Hughes Incorporated. The oil rig count decreased by 8 units to 644, and the natural gas rig count increased by 2 to 198 units.
- The natural gas plant liquids composite price at Mont Belvieu increased slightly, by 7¢ (1.4%) to $4.86/MMBtu for the week ending September 18. The natural gasoline price declined by 1.5%, or 13¢, while the prices for ethane, propane, butane, and isobutane increased moderately, by 1%, 3.2%, 2.9%, and 1.8%, respectively.
Prices/Demand/Supply:
With seasonal temperatures, prices decline. Natural gas prices decreased in most market locations nationwide over the report week, as temperatures remained slightly above average across most of the country, limiting the demand for excess cooling or heating. The Henry Hub spot price began the report week at $2.68/MMBtu last Wednesday and settled yesterday at $2.59/MMBtu. Prices at other locations also declined, most by less than 5%. In the West, prices at PG&E Citygate, serving Northern California, started the report period at $3.14/MMBtu last Wednesday, then dropped to $3.07/MMBtu yesterday. Prices at the Chicago Citygate declined by 5¢ over the report week, closing at $2.65/MMBtu yesterday. Other price points saw similar declines.
Northeast prices varied through the report week. In the Northeast, prices in New England saw some upward pressure due to compressor maintenance outages, which started Thursday and ended Tuesday, at Cromwell, Connecticut on the Algonquin Gas Transmission pipeline. Warmer-than-normal temperatures during the first few days of the report week may also have influenced pricing. Algonquin Citygate, which serves Boston, began the week Wednesday at $2.57/MMBtu, rose to $4.77/MMBtu on Thursday, then dropped to $3.13/MMBtu Monday as flows improved, closing the week at $2.00/MMBtu yesterday. Similarly, at the Tennessee Zone 6 200 line, serving lower New England, prices began the report week last Wednesday at $2.60/MMBtu, rose to $4.42/MMBtu on Thursday, and dropped through the remainder of the period to close down at $2.02/MMBtu yesterday. At Transcontinental Pipeline's Zone 6 trading point for New York City delivery, the spot price fluctuated during the report week, starting at $2.66 this past Wednesday dipping to $1.60 on Friday, then increasing to close at $2.31/MMBtu yesterday.
Marcellus prices remain low. Most Marcellus-area prices decreased during the report week. At Tennessee's Zone 4 Marcellus location, prices started the week at $1.24/MMBtu last Wednesday then dropped to $1.08/MMBtu yesterday. On the Transco Leidy Line, prices decreased from $1.28/MMBtu last Wednesday to $1.10/MMBtu yesterday. At Dominion South, which serves customers in portions of Pennsylvania, Ohio, Maryland, West Virginia, and Virginia, prices decreased by 8¢, falling from $1.36/MMBtu to $1.28/MMBtu.
The Ohio Pipeline Energy Network (OPEN) project entered partial service on September 18. Flows increased from OPEN's Tompkinsville compressor station to 1.1 Bcf/d on September 18, a 0.4 Bcf/d increase from its 30-day average, indicating that the OPEN project is ramping up to support takeaway from the Marcellus and Utica plays, according to Bentek Energy data.
Nymex prices decrease slightly. At the Nymex, the October contract began the week at $2.660/MMBtu and ended the report week down slightly, at $2.569/MMBtu yesterday. The October 2015 price is more than $1.24 below the October 2014 price of $3.816/MMBtu from this time last year. The 12-month strip, which averages the October 2015 through September 2016 Nymex prices, closed at $2.793/MMBtu yesterday, down slightly from the week-ago strip price of $2.871/MMBtu.
Supply increases slightly. Dry natural gas production increased by 0.2% this week, averaging 72.1 Bcf/d, 3.9% higher than the level for this week in 2014. Contributing to this increase, Northeast production set a new high at 20.57 Bcf/d, according to Bentek Energy data. Imports of natural gas from Canada rose by 1.3% week over week. Overall, supply increased slightly, by 0.1%.
Consumption decreases. U.S. consumption decreased by 0.1%, compared to the last report week, with total natural gas used for power generation (power burn) flat. Regional power burn increases in the Midwest (18%), Southeast (4%), Texas (8%), and Mid-Continent (42%) were offset by declines in the rest of the country. Consumption in the residential/commercial sectors increased by 0.6%, while industrial sector consumption decreased by 1%. Exports to Mexico averaged 3.0 Bcf/d, a 0.1% decrease from the previous week, though 39.8% higher than exports for the same week last year.
Storage
Net storage injection larger than five-year average and year-ago. The net injection reported for the storage report week ending September 18 was 106 Bcf, up from 73 Bcf the previous week. This injection compares with the five-year (2010-14) average increase of 83 Bcf for the week and last year's increase of 96 Bcf. Working gas inventories for the report week totaled 3,440 Bcf, 466 Bcf (16%) higher than last year at this time and 148 Bcf (4%) higher than the five-year average.
Storage injections are higher than expectations. Market expectations, on average, called for a build of 97 Bcf for the week. When the EIA storage report was released at 10:30 a.m. on September 24, the October Nymex price fell by about 2ȼ, from $2.55 to $2.53/MMBtu, and stayed at that level in the following hour.
From April 3 (the beginning of the injection season) through September 18, net storage injections totaled 1,979 Bcf, or 162 Bcf lower than the 2,141 Bcf injected during the same 24 weeks in 2014. During these weeks for the years 2010-14, net injections into storage averaged 1,641 Bcf. The estimated average unit value of the natural gas put into storage from April 3 to September 11 this year is $2.76/MMBtu, 36% lower than the average value of $3.99/MMBtu for the same 24 weeks last year. The highest winter-month Nymex price (for the January 2016 contract) in trading for the week ending September 18 averaged $2.98/MMBtu. This price is 34¢/MMBtu more than the October Nymex contract price. A year ago, the difference was also 34¢/MMBtu.
Temperatures during the storage report week are warmer than normal. Temperatures in the Lower 48 states averaged 69° for the storage report week, 1o warmer than the 30-year normal temperature and 3° warmer than the average temperature during the same week last year. There were 39 population-weighted cooling degree days (CDD) this report week, 2 CDD less than the five-year average and 1 CDD less than this week last year.
See also:
Commodity Prices, Germany Federal Office for Economic Affairs and Export Control (BAFA), Bloomberg LP.
| Spot Prices ($/MMBtu) | Thu, 17-Sep |
Fri, 18-Sep |
Mon, 21-Sep |
Tue, 22-Sep |
Wed, 23-Sep |
|---|---|---|---|---|---|
| Henry Hub |
2.68 |
2.63 |
2.59 |
2.59 |
2.59 |
| New York |
2.43 |
1.60 |
2.15 |
2.34 |
2.31 |
| Chicago |
2.71 |
2.64 |
2.65 |
2.65 |
2.65 |
| Cal. Comp. Avg,* |
2.83 |
2.75 |
2.77 |
2.79 |
2.80 |
| Futures ($/MMBtu) | |||||
| October contract |
2.652 |
2.605 |
2.573 |
2.577 |
2.569 |
| November contract |
2.728 |
2.676 |
2.642 |
2.639 |
2.638 |
| *Avg. of NGI's reported prices for: Malin, PG&E citygate, and Southern California Border Avg. | |||||
| Source: NGI's Daily Gas Price Index | |||||
| U.S. natural gas supply - Gas Week: (9/16/15 - 9/23/15) | ||
|---|---|---|
Percent change for week compared with: |
||
last year |
last week |
|
| Gross production | 3.94%
|
0.22%
|
| Dry production | 3.91%
|
0.22%
|
| Canadian imports | -0.56%
|
1.30%
|
| West (net) | 9.00%
|
-1.42%
|
| Midwest (net) | -15.78%
|
0.41%
|
| Northeast (net) | -54.13%
|
-42.82%
|
| LNG imports | N/A |
N/A |
| Total supply | 3.73%
|
0.15%
|
| Source: BENTEK Energy LLC | ||
| U.S. consumption - Gas Week: (9/16/15 - 9/23/15) | ||
|---|---|---|
Percent change for week compared with: |
||
last year |
last week |
|
| U.S. consumption | 4.6%
|
-0.1%
|
| Power | 17.4%
|
0.0%
|
| Industrial | -4.3%
|
-1.0%
|
| Residential/commercial | -4.6%
|
0.6%
|
| Total demand | 5.9%
|
-0.1%
|
| Source: BENTEK Energy LLC | ||
| Rigs | |||
|---|---|---|---|
Fri, September 18, 2015 |
Change from |
||
last week |
last year |
||
| Oil rigs | 644 |
-1.23% |
-59.78% |
| Natural gas rigs | 198 |
1.02% |
-39.82% |
| Miscellaneous | 0 |
0.00% |
-100.00% |
| Rig numbers by type | |||
|---|---|---|---|
Fri, September 18, 2015 |
Change from |
||
last week |
last year |
||
| Vertical | 119 |
0.00% |
-68.52% |
| Horizontal | 640 |
-1.23% |
-52.27% |
| Directional | 83 |
2.47% |
-60.85% |
| Source: Baker Hughes Inc. | |||
| Working gas in underground storage | ||||
|---|---|---|---|---|
Stocks billion cubic feet (bcf) |
||||
| Region | 2015-09-18 |
2015-09-11 |
change |
|
| East | 1,742 |
1,680 |
62 |
|
| West | 496 |
489 |
7 |
|
| Producing | 1,202 |
1,165 |
37 |
|
| Total | 3,440 |
3,334 |
106 |
|
| Source: U.S. Energy Information Administration | ||||
| Working gas in underground storage | |||||
|---|---|---|---|---|---|
Historical comparisons |
|||||
Year ago (9/18/14) |
5-year average (2010-2014) |
||||
| Region | Stocks (Bcf) |
% change |
Stocks (Bcf) |
% change |
|
| East | 1,637 |
6.4 |
1,772 |
-1.7 |
|
| West | 445 |
11.5 |
480 |
3.3 |
|
| Producing | 893 |
34.6 |
1,039 |
15.7 |
|
| Total | 2,974 |
15.7 |
3,292 |
4.5 |
|
| Source: U.S. Energy Information Administration | |||||
| Temperature -- heating & cooling degree days (week ending Sep 17) | ||||||||
|---|---|---|---|---|---|---|---|---|
HDD deviation from: |
CDD deviation from: |
|||||||
| Region | HDD Current |
normal |
last year |
CDD Current |
normal |
last year |
||
| New England | 9
|
-18
|
-40
|
15
|
11
|
14
|
||
| Middle Atlantic | 8
|
-11
|
-26
|
18
|
4
|
13
|
||
| E N Central | 27
|
3
|
-46
|
11
|
-4
|
11
|
||
| W N Central | 20
|
-9
|
-57
|
31
|
10
|
30
|
||
| South Atlantic | 8
|
3
|
2
|
56
|
-7
|
-14
|
||
| E S Central | 13
|
8
|
3
|
35
|
-16
|
-19
|
||
| W S Central | 1
|
0
|
-4
|
84
|
0
|
10
|
||
| Mountain | 11
|
-22
|
-21
|
52
|
11
|
4
|
||
| Pacific | 6
|
-4
|
4
|
43
|
11
|
-34
|
||
| United States | 13
|
-4
|
-22
|
39
|
1
|
-1
|
||
|
Note: HDD = heating degree-day; CDD = cooling degree-day Source: National Oceanic and Atmospheric Administration | ||||||||
Average temperature (°F)
7-Day Mean ending Sep 17, 2015
Source: NOAA/National Weather Service
Deviation between average and normal (°F)
7-Day Mean ending Sep 17, 2015
Source: NOAA/National Weather Service
