Natural Gas

Overview:

(For the Week Ending Wednesday, December 2, 2015)

• Natural gas prices were mixed over the report week (Wednesday, November 25, through Wednesday, December 2).
• The Henry Hub spot price began the week at $2.06 per million British thermal units (MMBtu) last Wednesday and ended the week up, at $2.17.
• At the New York Mercantile Exchange (Nymex), the January Nymex price began at $2.229/MMBtu last Wednesday and settled at $2.165 yesterday.
• Working natural gas in storage decreased by 53 Bcf, declining to 3,956 Bcf as of Friday, November 27. The net withdrawal from storage resulted in storage levels 16% above a year ago and 7% above the five-year (2010-14) average for this week.
• The total oil and natural gas rig count continues to fall, declining by 13 from the previous week, with 744 units in service for the week ending Friday, November 25, according to data from Baker Hughes Incorporated. The oil rig count fell by 9 units to 555, and the natural gas rig count declined by 4 to 189 units. Although rig efficiency has increased greatly in recent years, rig counts are historically low right now. Based on Baker Hughes information, the oil rig count has not been this low since mid-2010, and this is the lowest reported natural gas rig count tied with early October this year.
• The natural gas plant liquids composite price at Mont Belvieu, Texas, increased by 2.8% to $4.79/MMBtu for the week ending Friday, November 27. The prices of propane, butane, isobutane, and natural gasoline increased by 3.8%, 4.3%, 5.9%, and 1.8%, respectively. The price of ethane decreased slightly this week, falling 0.7%.

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Prices/Demand/Supply:

Spot prices mixed for the report period. The Henry Hub spot price increased slightly, rising by 11¢ from $2.06/MMBtu last Wednesday to $2.17/MMBtu yesterday. Prices at the Chicago Citygate began the report week at $2.06/MMBtu and closed the week up 14¢, at $2.20/MMBtu. The PG&E Citygate price, serving customers in northern California, stayed flat at $2.64/MMBtu this week.

With the exception of the Southeast, most of the country experienced much colder weather this report week compared to last week. Some states in the Rockies had temperatures that averaged 10 degrees colder or more than last week. The Southeast and some of the Gulf states, by contrast, enjoyed average temperatures in the 60s and even 70s for the week. Because nearly two-thirds of homes in the South use electric home-heating, this reduced overall demand for power burn.

Despite the cold weather in the Rockies, natural gas price movements in the region were mixed. Opal in southwest Wyoming increased by 4¢ over the report period, settling at $2.21/MMBtu yesterday. Northwest Sumas fell by 20¢, closing at $2.19/MMBtu yesterday, but it had increased by 15¢ the previous week. Sumas is an import point in northwest Washington, and the price was elevated at the beginning of the report week, possibly because of the major storm that affected the area a few days prior. The storm brought strong winds and heavy rain on Tuesday and Wednesday (11/17 and 11/18) and cut power to nearly 700,000 customers.

Prices up in some Northeast points. New England prices increased from the previous week as temperatures continued to fall in the region. Algonquin Citygate, which serves Boston-area consumers, opened at $2.62/MMBtu last Wednesday and closed at $3.06/MMBtu yesterday. Transco Zone 6 NY, serving New York City, rose from $1.74/MMBtu last Wednesday to $2.18 yesterday. By contrast, at Tennessee Zone 6 200L, serving lower New England, prices fell by 4¢ over the report week, closing at $2.92/MMBtu.

Marcellus prices rise. Marcellus prices increased over the report week and are back above the $1.00/MMBtu mark. At Tennessee's Zone 4 Marcellus trading point, prices began at $0.93/MMBtu last Wednesday and increased to $1.26 yesterday. Similarly, on Transco's Leidy Line, prices increased from $1.18/MMBtu to $1.26/MMBtu Wednesday-to-Wednesday.

Nymex prices fall. At the Nymex, the January contract began the week at $2.299/MMBtu and ended the report week down over 13¢, closing at $2.165/MMBtu yesterday. The 12-month strip, which averages the January 2015 through December 2016 Nymex prices, closed at $2.404/MMBtu yesterday, 8¢ lower than a week ago. This week last year, the 12-month strip averaged $3.829/MMBtu. This year's lower strip reflects record-high storage inventories and expectations of mild winter weather.

Supply declines slightly. Dry natural gas production declined by 0.3% this week, averaging 71.5 billion cubic feet per day, according to Bentek Energy data. Imports of natural gas from Canada declined by 3.7%, led by declines in imports into the Northeast. LNG sendout remained at minimal levels. Overall supply averaged 76.7 Bcf/d for the week, which is 0.6% lower than last week and 0.2% higher than this week last year.

Consumption decreases slightly. U.S. consumption of natural gas decreased by 1.8% compared to the previous report week, led by a substantial decrease in power sector consumption. Consumption of natural gas in power generation declined by 6.7%, driven largely by a 19.7% decrease in consumption in the Southeast, which was the only part of the country to experience warmer weather compared to last week. The Southeast relies on electricity more heavily than other parts of the country for home heating, and it is by far the largest natural gas-consuming region for power burn. Residential/commercial consumption increased by 1.4% week over week, while industrial consumption decreased by 0.8%. Exports to Mexico were up slightly, increasing 0.9% relative to last week, and 41.1% relative to this week last year.

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Storage

The first net storage withdrawal of the 2015-16 heating season begins after working natural gas stocks reached a record high. The NGWU was not published last week because of the Thanksgiving holiday on Thursday, November 26. Working gas climbed by 9 Bcf for the week ending November 20 to a record high of 4,009 Bcf, exceeding the previous record of 4,000 Bcf reported for the week ending November 13. With the beginning of net storage withdrawals, the working gas inventory for the storage week ending November 27 totaled 3,956 Bcf, which was 543 Bcf (16%) higher than last year at this time and 247 Bcf (7%) higher than the five-year average for this week. The net withdrawal for the storage week was 53 Bcf compared with the 9 Bcf injection reported the previous week. This withdrawal compares with the five-year (2010-14) average withdrawal of 48 Bcf for the week and last year's withdrawal of 42 Bcf for the same week.

Storage withdrawals are larger than market expectations. Market expectations, on average, called for a withdrawal of 49 Bcf for this week. When the EIA storage report was released at 10:30 a.m. on December 3, the January Nymex price rose about 2¢ per MMBtu, then immediately pulled back to about $2.17/MMBtu, and exhibited minor oscillations between $2.15/MMBtu and $2.17/MMBtu in the following hour.

Temperatures during the storage report week are close to normal. Temperatures in the Lower 48 states averaged 44° for the storage report week, 1° warmer than the 30-year normal temperature and 1° warmer than the average temperature during the same week last year. There were 151 population-weighted heating degree days (HDD) during this report week, 18 HDD more than the five-year average and 8 HDD fewer than during the same period last year.

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See also:

• Natural Gas Analysis Reports
• Short-Term Energy Outlook