Natural Gas

Overview:

(For the Week Ending Wednesday, June 1, 2016)

• Natural gas spot prices rose substantially at most market locations this report week (Wednesday, May 25, to Wednesday, June 1). The Henry Hub spot price rose by 49¢, from $1.77 per million British thermal unit (MMBtu) last Wednesday to $2.26/MMBtu yesterday.
• At the New York Mercantile Exchange (Nymex), the June 2016 contract expired on Thursday, May 26, at $1.963/MMBtu. The price of the July contract rose from $2.181/MMBtu last Wednesday to $2.381/MMBtu yesterday.
• Net injections to working gas totaled 82 billion cubic feet (Bcf) for the week ending May 27. Working gas stocks are 2,907 Bcf, which is 32% above the year-ago level and 35% above the five-year (2011-15) average for this week.
• According to Baker Hughes, for the week ending May 27, the natural gas rig count increased by 2 to 87 and oil-directed rigs fell by 2 to 316. The total rig count remained flat week over week at 404.
• The natural gas plant liquids composite price at Mont Belvieu, Texas, fell by 3% to $5.26/MMBtu for the week ending Friday, May 27. The price of natural gasoline rose 1%. Isobutane, butane, and propane fell by 3%, 3%, and 6%, respectively, while ethane prices remained constant.

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Prices/Supply/Demand:

Spot prices rise with temperatures. The Henry Hub spot price rose by 49¢, from $1.77/MMBtu last Wednesday to $2.26/MMBtu yesterday. This is the highest Henry Hub spot price since January. Prices at most other market locations saw similar increases, as much of the United States experienced early summer heat. At the Chicago Citygate, prices rose from $1.77/MMBtu to $2.24/MMBtu, Wednesday to Wednesday. At the PG&E Citygate in California, the spot price rose from $1.82/MMBtu to $2.40/MMBtu over the report week.

Northeast prices are slightly up. Prices in major northeastern market areas did not post the relatively dramatic increases seen in other areas of the country. At the Algonquin Citygate, which serves Boston-area consumers, prices were flat at $2.01/MMBtu, Wednesday to Wednesday. At the Transcontinental Pipeline's Zone 6 trading point for New York, prices rose from $1.62 last Wednesday to $1.71/MMBtu yesterday.

Marcellus prices rise slightly. Marcellus-area prices increased over the week. The Tennessee Zone 4 Marcellus price rose from $1.38/MMBtu last Wednesday to $1.42/MMBtu yesterday. The price at Dominion South in northwest Pennsylvania rose by 7¢, ending the week at $1.55/MMBtu.

Nymex June contract expires. At the New York Mercantile Exchange (Nymex), the June 2016 contract price expired Thursday at $1.963/MMBtu. The price of the July contract, which moved into the front-month position this week, rose from $2.181/MMBtu last Wednesday to $2.381/MMBtu yesterday.

Supply is flat. According to data from PointLogic, average total supply for the report period remained flat week over week. Dry production was level, averaging 73.5 billion cubic feet per day (Bcf/d) for the week, while net imports from Canada rose 1% and accounted for 5.9 Bcf/d of supply.

Consumption remains steady. Average consumption for the period remained constant, according to data from PointLogic, as increases in power burn offset declines in all other sectors. Consumption of natural gas for power generation rose 12% week over week, while residential/commercial consumption fell 26%. Industrial consumption fell by 2% and exports to Mexico fell 3%.

U.S. Liquified Natural Gas (LNG) exports. The natural gas pipeline flows to Sabine Pass liquefaction terminal averaged 0.55 Billion cubic feet per day (Bcf/d), 4% lower than receipts last week. One vessel (LNG-carrying capacity 3.4 Bcf) is currently loading an export cargo at the terminal.

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Storage:

Working gas stocks continue to climb. Working gas in the Lower 48 states posted its seventh straight week of net injections. Net injections into storage totaled 82 Bcf during the storage report week, compared with the five-year (2011-15) average of 98 Bcf and last year's net injection of 126 Bcf during the same week. As a result, the surplus in storage compared with the five-year average declined from the previous week to 753 Bcf, and the surplus compared with year-ago levels decreased to 712 Bcf. The year-over-year storage surplus fell for the seventh consecutive week.

The 2016 refill season shows stocks well ahead of recent injection seasons. Despite a 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 74 Bcf above the previous five-year (2011-15) maximum, which occurred in 2012, of 2,833 Bcf for this time of year. Cumulative net injections into working gas total 427 Bcf thus far in the 2016 refill season, compared with the five-year average of 548 Bcf and last year's tally of 723 Bcf during the same period. Cumulative net injections totaled 359 Bcf at this point in the 2012 refill season.

January futures price continues to trade at more than $1 above current spot price. During the most recent storage week, the average natural gas spot price at the Henry Hub was $1.83/MMBtu, while the Nymex futures price of natural gas for delivery in January 2017 averaged $3.06/MMBtu, a difference of $1.23/MMBtu. A year ago, the premium was 42¢/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 20, was $1.91/MMBtu, 29% lower than the average value of $2.69/MMBtu for the same period last year.

Stock change is close to analyst expectations. Expected net injections for the week generally ranged from 72 to 96 Bcf, with a median of 84 Bcf.

Climbing temperatures result in falling heating and rising cooling demand for natural gas. Temperatures in the Lower 48 states averaged 65°F during the storage report week, 1% above normal and equal to last year at this time. The Lower 48 states totaled 27 heating-degree days (HDD) for the report week–its lowest level since the beginning of the refill season on April 1. Conversely, cooling degree-days (CDD) in the Lower 48 hit its highest level since the beginning of 2016, totaling 27 CDD. Most of the warming occurred in the northern tier of the Lower 48 states, including the New England, Middle Atlantic, East North Central, and West North Central U.S. Census divisions.

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See also:

• Natural Gas Analysis Reports
• Short-Term Energy Outlook