Natural Gas

Overview:

(For the Week Ending Wednesday, January 20, 2016)

• Outside of the Northeast and the Marcellus region, natural gas spot prices fell at most trading locations during the report week (Wednesday, January 13, to Wednesday, January 20). The Henry Hub spot price fell from $2.30 per million British thermal units (MMBtu) last Wednesday to $2.14/MMBtu yesterday.
• At the New York Mercantile Exchange (Nymex), the price of the near-month (February 2016) contract decreased by about 15¢, from $2.269/MMBtu last Wednesday to $2.118/MMBtu yesterday.
• Working natural gas in storage decreased by 178 billion cubic feet (Bcf), declining to 3,297 Bcf as of Friday, January 15. The net withdrawal from storage resulted in storage levels 24% above a year ago and 17% above the five-year (2011–15) average for this week.
• The total oil and natural gas rig count declined again, falling by 14 units, with 650 units in service for the week ending Friday, January 15, according to data from Baker Hughes Incorporated. The oil rig count decreased by 1 unit to 515, and the natural gas rig count fell by 13 units to 135. This is the lowest recorded natural gas rig count in the Baker Hughes dataset, which goes back to 1987.
• The natural gas plant liquids (NGPL) composite price at Mont Belvieu, Texas, fell by 13.0% to $3.63/MMBtu for the week ending Friday, January 15. The spot prices of all liquids products fell this week, with ethane falling 6.0%, propane falling 12.6%, butane falling 14.7%, isobutane falling 14.9%, and natural gasoline falling 16.7%. The drop in prices most likely relates to the ongoing decline in crude oil prices.

more summary data

Prices/Demand/Supply:

Prices fall slightly at most points outside of the Northeast and Marcellus region. The Henry Hub spot price fell to $2.14/MMBtu yesterday from $2.30 last Wednesday. Price patterns at other major trading hubs were comparable to Henry Hub. The natural gas price at the Chicago Citygate began the week last Wednesday at $3.32/MMBtu and closed at $2.21/MMBtu yesterday. Temperatures were similar overall to last report week, but a bit warmer in the states bordering Mexico, and a bit colder in the Northeast.

On the West Coast, the price at the SoCal Citygate, serving customers in Southern California, fell to $2.38/MMBtu yesterday from $2.51/MMBtu last Wednesday. Southern California Gas Company (SoCal), a major utility in Southern California, has been experiencing a leak in one of its large natural gas storage fields, which started October 23 and is ongoing. The governor's office is releasing regular statements on the leak, and SoCal anticipates having the leak plugged sometime in February. While disruptive in the local community and broadly controversial, the leak has not had a noticeable effect on prices.

Northeast prices up. In the Northeast, prices at major market hubs increased Wednesday-to-Wednesday. Temperatures for the report period reached their lowest in the Northeast on Tuesday, but prices generally peaked yesterday. At Algonquin Citygate, which serves Boston, prices rose Wednesday-to-Wednesday from $4.40/MMBtu to $5.55/MMBtu. At the same time, prices at Tennessee Zone 6 200L, serving lower New England, rose from $4.38/MMBtu to $5.64/MMBtu.

Marcellus prices flat to up. Week-over-week, spot prices at major Marcellus trading hubs trended flat to increasing. At Dominion South in northwest Pennsylvania, prices began at $1.38/MMBtu last Wednesday and ended the report week at $1.61/MMBtu yesterday. Similarly, on Transco's Leidy Line in northern Pennsylvania, prices increased from $1.38/MMBtu to $1.40/MMBtu Wednesday-to-Wednesday, and were stable throughout the week. Noticeably, the Marcellus prices are well below the benchmark Henry Hub prices in Louisiana ($2.14 yesterday).

Production rises. Dry natural gas production rose 0.3% week-on-week, according to Bentek Energy. Imports of natural gas from Canada to the United States rose 10.7% from last week, contributing an additional 0.6 Bcf/d of supply. LNG sendout rose 75.6% this week, as Cove Point LNG facility in Maryland re-gasified some of its stocks to meet elevated consumption. Overall supply was up 1.6% week-on-week.

Consumption rises. Total U.S. consumption rose 3.1% week-on-week, according to Bentek data. Residential and commercial consumption drove the increase, rising 7.9%, or 3.8 Bcf/d over the report week. As typically happens in cold weather, industrial consumption also rose, increasing by 1.3%. Power burn, though still elevated compared to last year at this time, fell slightly this week, decreasing by 3.0%. The decrease in power burn was driven by the Southwest, which experienced more mild temperatures this report week compared to last. Exports to Mexico fell somewhat, declining by 4.5% for the period.

more price data

Storage

Net storage withdrawals are inline with the five-year average withdrawals. The net withdrawal for the storage week was 178 Bcf, compared with the 168 Bcf net storage withdrawal reported the previous week. This withdrawal compares with the five-year (2011–15) average net withdrawal of 177 Bcf for the week and last year's withdrawal of 220 Bcf for the same week. The working natural gas inventory for the storage week ending January 15 totaled 3,297 Bcf, which was 629 Bcf (24%) higher than last year at this time and 473 Bcf (17%) higher than the five-year average for this week.

Storage withdrawals are similar to market expectations. Market expectations, on average, called for a withdrawal of 181 Bcf for this week. When the EIA storage report was released at 10:30 a.m. on January 21, the February Nymex price fell about 5¢/MMBtu, to about $2.11/MMBtu, and dropped two cents further in the following hour.

Temperatures during the storage report week are close to normal. Temperatures in the Lower 48 states averaged 34°F for the storage report week, 1°F warmer than the 30-year normal temperature and 7°F warmer than the average temperature during the same week last year. There were 215 population-weighted heating degree days (HDD) during this report week, 21 HDD more than the five-year average and 46 HDD fewer than during the same period last year.

more storage data

See also:

• Natural Gas Analysis Reports
• Short-Term Energy Outlook