Natural Gas

Overview:

(For the Week Ending Wednesday, March 30, 2016)

• Natural gas spot price movements were mixed this report week (Wednesday, March 23, to Wednesday, March 30). The Henry Hub spot price rose slightly during the report week from $1.80 per million British thermal units (MMBtu) to $1.84/MMBtu yesterday.
• At the New York Mercantile Exchange (Nymex), the April 2016 contract expired on Tuesday at $1.903/MMBtu. The May contract moved into the front month position and rose over the report week from $1.868/MMBtu last Wednesday to $1.996/MMBtu yesterday.
• Net withdrawals from working gas storage totaled 25 billion cubic feet (Bcf) for the week ending March 25. Working gas stocks total 2,468 Bcf—68.3% above the year-ago level and 51.9% above the five-year (2011-15) average.
• For the week ending March 24, gas-directed rigs increased by 3 to 92, and oil-directed rigs fell by 15 to 372. The total rig count fell by 12, and now stands at 464.
• The natural gas plant liquids (NGPL) composite price at Mont Belvieu, Texas, increased by a penny to $4.61/MMBtu for the week ending Friday, March 25. The prices of ethane and natural gasoline rose by 1.0% and 3.2%, respectively. The prices of isobutane, butane, and propane fell by 0.5%, 0.7%, and 1.1%, respectively.

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Prices/Demand/Supply:

Prices mixed around the country. At trading points around the Gulf Coast, prices rose slightly during the report week. The national benchmark Henry Hub price increased from $1.80/MMBtu last Wednesday to $1.84/MMBtu yesterday, its third consecutive weekly increase. Most spot prices around the country also posted slight increases week over week. At the Chicago Citygate, prices rose from $1.90/MMBtu last Wednesday to $1.95/MMBtu yesterday. At the PG&E Citygate in California, prices fell from $2.01/MMBtu last Wednesday to $1.95/MMBtu yesterday. The trading week was short, with markets closed the Friday before Easter.

Northeast prices remain relatively low. Prices at most locations serving market areas in the Northeast declined this week, with the exception of a slight increase in New York. At the Algonquin Citygate, which serves Boston, prices fell from $1.36/MMBtu last Wednesday to $1.30/MMBtu yesterday. At Transcontinental Pipeline's Zone 6 trading point for New York City delivery, prices began the week at $1.26/MMBtu last Wednesday and ended the week at $1.28/MMBtu.

Marcellus prices decrease slightly. At Dominion South in northwest Pennsylvania, prices began at $1.15/MMBtu last Wednesday and ended the week at $1.14/MMBtu yesterday. On Transco's Leidy Line in northern Pennsylvania, prices posted a 2¢ decline, falling from $1.15/MMBtu last Wednesday to $1.13/MMBtu yesterday.

Nymex prices increase. At the Nymex, the April 2016 contract rolled off the board Tuesday, expiring at $1.903/MMBtu. The May contract moved into the front-month position, and rose from $1.868/MMBtu last Wednesday to $1.996/MMBtu yesterday. The price of the 12-month strip (the average price of the 12 contracts between May 2016 and April 2017) increased from $2.384/MMBtu last Wednesday to $2.508/MMBtu yesterday.

Supply declines. According to data from Bentek Energy, total supply fell by 1.2%, with declines in most components of supply. Dry production fell by 0.4% week over week, and is 1.2% less than it was during this week last year. Bentek noted that flooding in Louisiana and Texas has somewhat hindered onshore Gulf Coast area production this month, and low prices and pipeline maintenance may have led to declines in Northeast production, as well. Pipeline imports from Canada fell 10.0% this week overall. LNG sendout declined, remaining at very low levels.

Consumption falls. Overall consumption this week fell by 5.1%, driven by a 9.4% decline in residential and commercial consumption, which was likely the result of mild spring temperatures most of the week. Industrial sector consumption fell 1.9%, consumption of natural gas for power generation fell 3.4%, and pipeline exports to Mexico rose 2.3%.

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Storage:

Net withdrawals from storage were larger than the five-year (2011-15) average for this time of year. Net withdrawals from storage totaled 25 Bcf, compared with the five-year average withdrawal of 22 Bcf and the year-ago withdrawal of 10 Bcf for the storage report week. This ends an eight-week streak in which the implied net change was smaller than the five-year average. Since January 22, the storage surplus compared with the five-year average has grown from 432 to 843 Bcf. Natural gas storage is 1,002 Bcf higher than a year ago.

Working gas stocks remain at record high for this time of year. Despite a larger-than-average net withdrawal for the week, working gas stocks remain at record-highs for this time of year. Working gas stocks are currently 27 Bcf above the five-year maximum for the storage report week of 2,441 Bcf set in 2012. The traditional end of the season is March 31. The record high for the end of the heating season occurred in 2012, when working gas stocks totaled 2,473 Bcf.

The storage figure for the week was in the range of expectations. Market analysts' expectations for the week called for net withdrawals ranging between 16 Bcf and 33 Bcf. At 25 Bcf, net withdrawals were close to the median expected value of 22 Bcf for the week. The price for the Nymex futures contract for May delivery at the Henry Hub fell about 1¢/MMBtu in 638 trades executed at the release of EIA's Weekly Natural Gas Storage Report.

Temperatures were higher-than-normal during the storage week. Temperatures in the Lower 48 states averaged 48°F during the report week, 3% higher than normal and 3% above last year at this time. These above-normal temperatures are a continuation of an ongoing pattern that has occurred since the beginning of the 2015-16 heating season on November 1, 2015. Temperatures have been above normal levels during 18 out of 21 weeks in the 2015-16 heating season so far. Cumulative heating degree-days during this period are 17% below normal.

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See also:

• Natural Gas Analysis Reports
• Short-Term Energy Outlook