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Natural Gas Weekly Update

for week ending March 30, 2016   |  Release date:  March 31, 2016   |  Next release:  April 7, 2016   |   Previous weeks

JUMP TO: In The News | Overview | Prices/Supply/Demand | Storage

In the News:

Rockies Express Pipeline (REX) wins final approval for Midwest east-to-west capacity expansion

The Federal Energy Regulatory Commission (FERC) earlier this month granted Tallgrass Energy final approval for construction of the Midwest (Zone 3) capacity enhancement for the Rockies Express Pipeline (REX). Zone 3 runs from Clarington Hub in eastern Ohio to the Mexico compressor station in Audrain County, Missouri. The expansion will increase the east-to-west capacity of Zone 3 to 2.6 billion cubic feet per day (Bcf/d) from 1.8 Bcf/d and is the last significant step of the multiyear project plan for reversing flow on REX Zone 3.

REX is operated by Tallgrass Energy, which currently owns 50% of the pipeline. On March 29, co-owner Sempra U.S. Gas & Power announced it was selling its 25% stake in REX to Tallgrass Energy. This will leave Tallgrass Energy with a 75% stake in REX, with the other 25% owned by ConocoPhillips.

REX was originally built to transport natural gas produced in the Rockies to the Midwest and Northeast markets. However, increased natural gas production in the Marcellus and Utica shale plays reduced local natural gas prices to the point where it became economic to export gas out of Pennsylvania and Ohio. The reversal of Zone 3 on the REX pipeline was fully subscribed with firm, 20-year contracts for all 1.8 Bcf/d of Zone 3 westward capacity.

Tallgrass Energy planned to expand Zone 3's reversed capacity even before the initial pipeline reversal was complete and filed an application for the Zone 3 expansion with FERC at the end of March 2015. Tallgrass Energy has obtained 15-year contracts for 95% of the 0.8 Bcf/d expansion capacity.

Tallgrass Energy expects the expansion to be operational in fourth-quarter 2016. Several other pipeline projects carrying natural gas out of the Marcellus and Utica regions came online in late 2015, and still others are currently scheduled to come online after the REX expansion. The proposed 0.6 Bcf/d Constitution Pipeline from Pennsylvania to upstate New York originally had a target start date of March 2015, but delays have pushed this back to the second half of 2017. The proposed 1.7 Bcf/d Atlantic Sunrise Pipeline from northeast Pennsylvania to the Transco mainline in Lancaster County in southeast Pennsylvania has also faced delays, which may push completion beyond its target date of the second half of 2017. The proposed Atlantic Coast Pipeline, designed to bring natural gas from West Virginia to Virginia and North Carolina, would have a capacity of 1.5 Bcf/d. It remains on schedule to begin operation in late 2018.

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.

more summary data

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%.

more price data

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.

more storage data

See also:

Rockies Express Pipeline (REX) Zone 3


Natural gas spot prices
Spot Prices ($/MMBtu)
Thu,
24-Mar
Fri,
25-Mar
Mon,
28-Mar
Tue,
29-Mar
Wed,
30-Mar
Henry Hub
1.72
Holiday
1.73
1.77
1.84
New York
1.12
Holiday
1.56
1.47
1.28
Chicago
1.79
Holiday
1.81
1.83
1.95
Cal. Comp. Avg,*
1.70
Holiday
1.70
1.75
1.84
Futures ($/MMBtu)
April Contract
1.806
Holiday
1.848
1.903
Expired
May Contract
1.882
Holiday
1.936
1.981
1.996
June Contract
1.989
Holiday
2.048
2.097
2.110
*Avg. of NGI's reported prices for: Malin, PG&E Citygate, and Southern California Border Avg.
Source: NGI's Daily Gas Price Index
Natural gas futures prices
Natural gas liquids spot prices


U.S. natural gas supply - Gas Week: (3/23/16 - 3/30/16)
Percent change for week compared with:
 
last year
last week
Gross production
-1.21%
-0.41%
Dry production
-1.20%
-0.41%
Canadian imports
-11.62%
-10.03%
      West (net)
12.55%
0.29%
      Midwest (net)
17.58%
-3.41%
      Northeast (net)
-147.34%
-648.65%
LNG imports
25.97%
-56.67%
Total supply
-1.85%
-1.19%
Source: BENTEK Energy LLC
U.S. consumption - Gas Week: (3/23/16 - 3/30/16)
Percent change for week compared with:
 
last year
last week
U.S. consumption
-4.4%
-5.1%
Power
5.6%
-3.4%
Industrial
-0.7%
-1.9%
Residential/commercial
-15.9%
-9.4%
Total demand
-3.1%
-4.8%
Source: BENTEK Energy LLC
Natural gas supply


Weekly natural gas rig count and average Henry Hub
Rigs
Fri, March 25, 2016
Change from
 
last week
last year
Oil rigs
372
-3.88%
-54.24%
Natural gas rigs
92
3.37%
-60.52%
Miscellaneous
0
0.00%
-100.00%
Rig numbers by type
Fri, March 25, 2016
Change from
 
last week
last year
Vertical
53
-8.62%
-63.19%
Horizontal
359
-2.71%
-55.79%
Directional
52
6.12%
-43.48%
Source: Baker Hughes Inc.


Working gas in underground storage
Stocks
billion cubic feet (bcf)
Region
2016-03-25
2016-03-18
change
East
439
453
-14
Midwest
555
571
-16
Mountain
147
148
-1
Pacific
262
260
2
South Central
1,065
1,061
4
Total
2,468
2,493
-25
Source: U.S. Energy Information Administration
Working gas in underground storage
Historical comparisons
Year ago
(3/25/15)
5-year average
(2011-2015)
Region
Stocks (Bcf)
% change
Stocks (Bcf)
% change
East
261
68.2
311
41.2
Midwest
266
108.6
342
62.3
Mountain
114
28.9
114
28.9
Pacific
268
-2.2
202
29.7
South Central
558
90.9
656
62.3
Total
1,466
68.3
1,625
51.9
Source: U.S. Energy Information Administration


Temperature -- heating & cooling degree days (week ending Mar 24)
 
HDD deviation from:
 
CDD deviation from:
Region
HDD Current
normal
last year
CDD Current
normal
last year
New England
181
-8
-80
0
0
0
Middle Atlantic
158
-16
-72
0
0
0
E N Central
164
-18
-32
0
0
0
W N Central
174
-6
13
0
-1
0
South Atlantic
90
-10
-10
11
-1
-8
E S Central
93
-1
24
0
-5
0
W S Central
66
12
35
8
-5
-12
Mountain
136
-14
33
5
2
1
Pacific
60
-26
15
0
-1
0
United States
124
-13
-11
3
-2
-3
Note: HDD = heating degree-day; CDD = cooling degree-day

Source: National Oceanic and Atmospheric Administration

Average temperature (°F)

7-Day Mean ending Mar 24, 2016

Mean Temperature (F) 7-Day Mean ending Mar 24, 2016

Source: NOAA/National Weather Service

Deviation between average and normal (°F)

7-Day Mean ending Mar 24, 2016

Mean Temperature Anomaly (F) 7-Day Mean ending Mar 24, 2016

Source: NOAA/National Weather Service