Natural Gas

Overview:

(For the Week Ending Wednesday, January 27, 2016)

• Outside of the Northeast, prices generally rose this report week. The Henry Hub spot price rose from $2.14 per million British thermal unit (MMBtu) last Wednesday, January 20, to $2.24/MMBtu yesterday, January 27.
• At the New York Mercantile Exchange (Nymex), the price of the near-month (February 2016) contract increased 3% from $2.118/MMBtu last Wednesday to $2.189/MMBtu yesterday.
• Working natural gas in storage decreased by 211 billion cubic feet (Bcf), declining to 3,086 Bcf as of Friday, January 22. The net withdrawal from storage resulted in storage levels 21% above a year ago and 16% above the five-year (2011–15) average for this week.
• The total oil and natural gas rig count declined by 13 units, with 637 units in service for the week ending Friday, January 22, according to data from Baker Hughes Incorporated. The oil rig count decreased by 5 units to 510, and the natural gas rig count fell by 8 units to 127. 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 6.2% to $3.41/MMBtu for the week ending Friday, January 22. The spot prices of all liquids products fell this week, with ethane falling 3.1%, propane falling 8.9%, butane falling 5.3%, isobutane falling 5.2%, and natural gasoline falling 5.9%. The drop in prices most likely relates to the ongoing decline in crude oil prices.

more summary data

Prices/Demand/Supply:

Natural gas prices flat to slightly up. Outside of the Northeast, price movements were minimal this week. The Henry Hub spot price rose nearly 5% from $2.14/MMBtu last Wednesday to $2.24/MMBtu yesterday, January 27. Despite a major winter storm this past weekend, the Henry Hub spot price did not substantially rise. At the Chicago Citygate, the spot price rose from $2.21/MMBtu last Wednesday to $2.22/MMBtu yesterday. Similarly, west of the Mississippi River, prices were flat. In the Rocky Mountains, the spot price at the Opal Hub in Wyoming opened and closed the report week at $2.07/MMBtu. At the PG&E Citygate in California, natural gas prices also remained flat at $2.46/MMBtu, Wednesday-to-Wednesday.

Northeast prices fall. In major market areas in the Northeast, prices declined substantially this week. At the Algonquin Citygate, which serves Boston, prices fell from $5.55/MMBtu last Wednesday to $3.52/MMBtu yesterday. Boston-area prices fell throughout the week. At Transcontinental Pipeline's Zone 6 trading point serving New York City, prices fell from $3.58/MMBtu last Wednesday to $2.43/MMBtu yesterday. On Friday, heading into the winter storm, prices settled at $3.80/MMBtu, up 30¢ from the previous day.

Marcellus prices flat. Week-over-week, spot prices at major Marcellus trading hubs trended flat. At Dominion South in northwest Pennsylvania, prices began at $1.61/MMBtu last Wednesday and ended the report week at $1.60/MMBtu yesterday. Similarly, on Transco's Leidy Line in northern Pennsylvania, prices fell from $1.40/MMBtu to $1.38/MMBtu Wednesday-to-Wednesday. At Tennessee Pipeline's Zone 4 Marcellus trading point, prices were flat at $1.36 Wednesday-to-Wednesday.

Nymex prices rise. The price of the Nymex February 2016 contract rose from $2.118/MMBtu last Wednesday to $2.189/MMBtu yesterday, when it expired and the March contract moved into the near-month position. The price of the 12-month strip (the 12 contracts between February 2016 and January 2017) rose slightly from $2.399/MMBtu last Wednesday to $2.412/MMBtu yesterday.

Production rises. Dry natural gas production rose 0.4% week over week and is 0.1% greater than the same week last year, according to Bentek data. U.S. imports of natural gas from Canada fell 5.3%. A 17.2% decline in imports to the Midwest offset a 1.3% increase in imports to the West and a 2.6% increase in imports to the Northeast. LNG sendout declined by 14.1%.

Consumption falls. U.S. consumption fell by 5.4%, with the largest decline coming from the residential/commercial sector. Despite a winter storm dumping snow across the East Coast, residential and commercial consumption did not reach the highs it reached in the previous report week, when temperatures were colder. Industrial consumption fell by 2.0%, and consumption of natural gas for electric power generation fell by 0.9%. U.S. exports of natural gas to Mexico fell by 4.2%.

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Storage

EIA reports largest weekly net storage pull in the 2015-16 heating season. Net withdrawals from working gas totaled 211 Bcf, exceeding the 5-year (2011-15) average net withdrawal of 170 Bcf by 24%. The withdrawal was almost twice as large as last year's pull for the same storage week. This marks the fourth consecutive week of triple-digit storage withdrawals in the Lower 48 states. Still, working gas levels remain relatively high, with a surplus of 530 Bcf (21%) compared with last year at this time, and 432 Bcf (16%) higher than the 5-year average.

Withdrawals from working gas are generally in line with market expectations. Market analysts predicted working gas draws totaling 207 Bcf for the week, on average. Prices on the Nymex for the March 2016 futures contract gained 3¢/ MMBtu to $2.13/MMBtu in fairly heavy trading, with 815 contracts trading hands immediately following the release of EIA's Weekly Natural Gas Storage Report at 10:30 a.m.

The storage report week is the coldest of the 2015–16 heating season. Temperatures for the report week averaged just less than 32°F, about 1°F below the normal level for this time of year and 6°F below the level reported last year at this time. The cold snap increased heating demand by about 8% over the previous week, with heating degree-days (HDD) totaling 233 for the week. Cumulative HDD remain about 13% below normal thus far in the heating season, which began November 1, despite the colder-than-normal temperatures reported for the storage week.

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See also:

• Natural Gas Analysis Reports
• Short-Term Energy Outlook