Natural Gas

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Natural Gas Weekly Update

for week ending May 4, 2016   |  Release date:  May 12, 2016   |  Next release:  May 19, 2016   |   Previous weeks

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

In the News:

Alberta wildfires reduce natural gas demand and prices in Canada

The wildfires in Alberta near its oil sands operations have led to low consumption of natural gas, which is used in oil sands mining operations, and all-time lows in Canadian natural gas prices.

The Alberta fires began Sunday, May 1, southwest of Fort McMurray, a major center of oil sands activity, and led to the evacuation of the city, but destruction was less widespread than originally feared. Officials estimate 85% - 90% of homes and buildings remain intact. By some industry analyst estimates, oil production fell by about 1 million barrels per day. Trade press reports indicate natural gas consumption has declined in the past week as a result. In addition to its use in mining and upgrading operations, natural gas is also used by many oil sands producers to operate cogeneration facilities. Declines in crude oil production are largely the result of the evacuation of oil workers, rather than direct damage to oil fields.

Media reports estimated consumption of natural gas in Alberta fell by close to 25%. While Canadian spot prices rose in the early days of the fires last week, these declines in consumption pushed prices to record lows. On the AECO trading point, a major hub for spot natural gas markets in Canada and represents all deliveries along TransCanada's Alberta pipeline system, prices dropped to $0.55 per million British thermal units (MMBtu) on Monday, their lowest price in the 14-year available history. By Wednesday, prices had recovered to $1.12 as some producers restarted operations. Prices at AECO had been relatively low before the fires, due at least in part to high storage levels in the United States and Canada. According to some industry analyst estimates, Alberta storage is nearing capacity and could be full within the next few months.

While the wildfires continue to burn, they have moved away from Fort McMurray, and some oil producers in the area have restarted operations. Shell Canada reported on Tuesday that it had restarted operations after a seven-day closure caused by the fires. Alberta's government is monitoring the fires and reporting on its website.

The AECO Hub is a trademarked name describing Niska Gas Storage's Countess and Suffield storage facilities, in southern Alberta. As a pricing point, AECO generally refers to all deliveries on TransCanada's Alberta pipeline system.

Overview:

(For the Week Ending Wednesday, May 11, 2016)

  • Natural gas spot prices fell at most locations this report week (Wednesday, May 4, to Wednesday, May 11), with a few scattered price increases. Declines in northeastern market areas were substantial. The Henry Hub spot price posted a 2¢ increase from $1.99/MMBtu last Wednesday to $2.01/MMBtu yesterday.
  • At the New York Mercantile Exchange (Nymex), the June 2016 contract price also rose slightly over the report week, from $2.141/MMBtu last Wednesday to $2.173/MMBtu yesterday.
  • Net injections to working gas totaled 56 billion cubic feet (Bcf) for the week ending May 6. Working gas stocks are 2,681 Bcf, which is 44% above the year-ago level and 44% above the five-year (2011-15) average for this week.
  • According to Baker Hughes data, for the week ending May 6, the natural gas rig count fell by 1 to 86, and oil-directed rigs fell by 4 to 328. The total rig count fell by 5, and now stands at 415.
  • The natural gas plant liquids (NGPL) composite price at Mont Belvieu, Texas, fell by 0.6% to $4.97/MMBtu for the week ending Friday, May 6. The prices of ethane and natural gasoline declined by 4.3% and 5.3%, respectively. Butane, propane, and isobutane rose by 1.7%, 2.3%, and 2.4%, respectively.

more summary data

Prices/Supply/Demand:

Henry Hub spot prices rise slightly. The Henry Hub spot price rose 2¢ this week from $1.99/MMBtu last Wednesday to $2.01/MMBtu yesterday. At most other locations, however, prices declined. At the Chicago Citygate, prices fell over the week from $2.09 to $2.01/MMBtu. At the PG&E Citygate in California, the spot price dropped a penny week over week from $2.13/MMBtu to $2.12 yesterday.

Northeast prices drop. At the Algonquin Citygate, which serves Boston-area consumers, prices fell from $2.83/MMBtu last Wednesday to $2.06/MMBtu yesterday. Although Algonquin prices fell this week, the Algonquin pipeline system has been undergoing maintenance, and flows remain constrained along various points. At Transcontinental Pipeline's Zone 6 trading point for New York, prices fell from $1.99/MMBtu last Wednesday to $1.56 yesterday.

Marcellus prices mixed. Marcellus-area price changes were mixed, but movements were small. The Tennessee Zone 4 Marcellus price fell slightly from $1.41/MMBtu last Wednesday to $1.38/MMBtu yesterday. The price at Dominion South in northwest Pennsylvania rose 2¢, ending the week at $1.44/MMBtu.

Nymex near-month prices up. At the Nymex, the June 2016 contract price rose over the report week, from $2.141/MMBtu last Wednesday to $2.173/MMBtu yesterday. On the other hand, the 12-month strip, averaging June 2016 through May 2017 contracts, declined slightly from $2.709/MMBtu last Wednesday to $2.691/MMBtu.

U.S. LNG export terminal begins commercial operations. Since its first export on February 25, Sabine Pass Train 1 was authorized to export LNG in a commissioning stage, allowing it to test its systems for full-time commercial work. On May 3, the Federal Energy Regulatory Commission (FERC) authorized commercial operations for Train 1. There were seven cargoes totaling 24.7 Bcf of LNG shipped from Sabine Train 1 while in commissioning stage. Commissioning of the Sabine Pass Train 2 has also begun, as announced last week by the terminal's operator, Cheniere. Total natural gas pipeline deliveries to the facility averaged 0.44 Bcf/d February 18 — May 11, since the commissioning of the terminal began, according to OPIS PointLogic Energy, an IHS Company. Last week (May 4-11), natural gas deliveries to the terminal averaged 0.39 Bcf/d, while one cargo carrying 3.8 Bcf was shipped from Train 1.

more price data

Storage:

Working gas stocks continue to climb. Working gas in the Lower 48 states posted its fourth straight week of net injections. Net injections into storage totaled 56 Bcf during the storage report week, compared with the five-year (2011-15) average of 79 Bcf and last year's net injection of 101 Bcf during the same week. As a result, the surplus in storage compared with the five-year average declined from the previous week to 813 Bcf, and the surplus compared with year-ago levels decreased to 816 Bcf.

The 2016 refill season remains well behind the pace of recent injection seasons. Cumulative net injections into working gas total 201 Bcf thus far in the 2016 refill season, compared with the five-year average (2011-15) of 262 Bcf and last year's tally of 393 Bcf during the same period. Despite the slow start to the refill season, working gas stocks remain near record-highs for this time of year. Working gas stocks as of last Friday were 58 Bcf above the previous five-year (2011-15) maximum of 2,623 Bcf for this time of year, which occurred in 2012. This surplus over the 2012 refill season record level increased for the third consecutive week. Cumulative net injections totaled 149 Bcf at this point in the 2012 refill season.

January futures price continues to trade at more than $1 above current spot price. Decisions about whether to inject gas into storage during the refill season are often made with an eye toward the upcoming January, because it is typically the coldest winter month. During the most recent storage week, the average natural gas spot price at the Henry Hub was $1.94/MMBtu, while the Nymex futures price of natural gas for delivery in January 2017 averaged $3.11/MMBtu, a difference of $1.17/MMBtu. A year ago, the premium was 52¢/MMBtu, suggesting there is more financial incentive this year to buy and store natural gas in the summer for sale in the winter. The average Henry Hub price so far in the injection season this year, from April 1 to May 6, was $1.91/MMBtu, 27% lower than the average value of $2.60/MMBtu for the same period last year.

Stock change is within the range of analyst expectations. Expected net injections for the week generally ranged from 50 to 70 Bcf, with a median of 58 Bcf. At the release of the Weekly Natural Gas Storage Report, the price for the natural gas futures contract on the Nymex for June delivery at the Henry Hub fell less than 1¢/MMBtu to $2.16/MMBtu, with 117 trades executed at the release.

Temperatures are below seasonal norms in most of the Lower 48 states. Temperatures in the Lower 48 states averaged 57°F during the storage report week, 1% below normal and 8% below last year at this time. Only the South Atlantic, East South Central, and Pacific U.S. Census Divisions reported temperatures that were above normal.

more storage data

See also:



Natural gas spot prices
Spot Prices ($/MMBtu)
Thu,
05-May
Fri,
06-May
Mon,
09-May
Tue,
10-May
Wed,
11-May
Henry Hub
2.04
1.84
1.97
2.04
2.01
New York
1.83
1.44
1.75
1.64
1.56
Chicago
2.02
1.89
1.96
2.02
2.01
Cal. Comp. Avg.*
2.01
1.81
2.02
2.04
2.01
Futures ($/MMBtu)
June contract
2.076
2.101
2.098
2.158
2.173
July contract
2.238
2.243
2.229
2.285
2.301
*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: (5/4/16 - 5/11/16)

Data are not available

U.S. consumption - Gas Week: (5/4/16 - 5/11/16)

Data are not available

Data are not available



Weekly natural gas rig count and average Henry Hub
Rigs
Fri, May 06, 2016
Change from
 
last week
last year
Oil rigs
328
-1.20%
-50.90%
Natural gas rigs
86
-1.15%
-61.09%
Miscellaneous
1
0.00%
-80.00%
Rig numbers by type
Fri, May 06, 2016
Change from
 
last week
last year
Vertical
53
6.00%
-53.51%
Horizontal
318
-1.85%
-54.05%
Directional
44
-4.35%
-50.00%
Source: Baker Hughes Inc.


Working gas in underground storage
Stocks
billion cubic feet (bcf)
Region
2016-05-06
2016-04-29
change
East
468
454
14
Midwest
582
566
16
Mountain
161
157
4
Pacific
288
284
4
South Central
1,182
1,164
18
Total
2,681
2,625
56
Source: U.S. Energy Information Administration
Working gas in underground storage
Historical comparisons
Year ago
(5/6/15)
5-year average
(2011-2015)
Region
Stocks (Bcf)
% change
Stocks (Bcf)
% change
East
332
41.0
375
24.8
Midwest
331
75.8
385
51.2
Mountain
122
32.0
115
40.0
Pacific
291
-1.0
234
23.1
South Central
789
49.8
759
55.7
Total
1,865
43.8
1,868
43.5
Source: U.S. Energy Information Administration


Temperature -- heating & cooling degree days (week ending May 05)
 
HDD deviation from:
 
CDD deviation from:
Region
HDD Current
normal
last year
CDD Current
normal
last year
New England
122
29
60
0
0
0
Middle Atlantic
101
24
61
0
-1
-1
E N Central
95
13
45
0
-3
-4
W N Central
87
16
50
0
-5
-12
South Atlantic
30
-3
5
43
18
16
E S Central
27
-3
-2
20
5
1
W S Central
17
8
7
34
-3
-3
Mountain
89
5
41
11
-2
-8
Pacific
35
-15
7
1
-5
-8
United States
68
7
32
14
1
-1
Note: HDD = heating degree-day; CDD = cooling degree-day

Source: National Oceanic and Atmospheric Administration

Average temperature (°F)

7-Day Mean ending May 05, 2016

Mean Temperature (F) 7-Day Mean ending May 05, 2016

Source: NOAA/National Weather Service

Deviation between average and normal (°F)

7-Day Mean ending May 05, 2016

Mean Temperature Anomaly (F) 7-Day Mean ending May 05, 2016

Source: NOAA/National Weather Service