Natural Gas

Overview:

(For the Week Ending Wednesday, May 10, 2017)

• Natural gas spot prices rose at most locations this report week (Wednesday, May 3 to Wednesday, May 10). The Henry Hub spot price rose from $3.09 per million British thermal units (MMBtu) last Wednesday to $3.11/MMBtu yesterday.
• At the New York Mercantile Exchange (Nymex), the June 2017 contract price rose 6¢ from $3.228/MMBtu last Wednesday to $3.292/MMBtu yesterday.
• Net injections to working gas totaled 45 Bcf for the week ending May 5. Working natural gas stocks are 2,301 Bcf, which is 14% lower than the year-ago level and 14% higher than the five-year (2012–16) average for this week.
• The natural gas plant liquids composite price at Mont Belvieu, Texas, rose by 3¢, averaging $5.99/MMBtu for the week ending May 10. The prices of natural gasoline, butane, and isobutane fell by 2%, 1%, and 3%, respectively. The prices of ethane and propane rose by 3% and 2%, respectively.
• According to Baker Hughes, for the week ending Friday, May 5, the natural gas rig count increased by 2 to 173. The number of oil-directed rigs rose by 6 to 703. The total rig count increased by 7, and now stands at 877.

more summary data

Prices/Supply/Demand:

Prices mostly rise. This report week (Wednesday, May 3 to Wednesday, May 10), the Henry Hub spot price rose 2¢ from $3.09/MMBtu last Wednesday to $3.11/MMBtu yesterday. At the Chicago Citygate, prices increased 14¢ to $3.08/MMBtu yesterday. At almost every trading point, prices increased substantially between Tuesday and yesterday, jumping 8¢ at Henry Hub, for example.

As with Henry Hub, West Coast prices increased between Tuesday and yesterday, such as SoCal Citygate, which jumped 10¢. The SoCal Citygate price rose 6¢ Wednesday to Wednesday, settling at $3.23/MMBtu yesterday. Prices at PG&E Citygate in Northern California gained 15¢ to $3.42/MMBtu yesterday.

Northeast prices mostly rise outside of Boston. At the Transcontinental Pipeline Zone 6 trading point for New York, prices increased 13¢ to $2.98/MMBtu yesterday. In contrast, at the Algonquin Citygate, which serves Boston-area consumers, prices went down 12¢ from $3.29/MMBtu last Wednesday to $3.17/MMBtu yesterday.

Tennessee Zone 4 Marcellus spot prices advanced 7¢ to $2.74/MMBtu yesterday. Prices at Dominion South in northwest Pennsylvania rose 12¢ to $2.88/MMBtu yesterday.

June contract prices rise. At the Nymex, the price of the June 2017 contract increased 6¢, from $3.228/MMBtu last Wednesday to $3.292/MMBtu yesterday. The price of the 12-month strip, averaging June 2017 through May 2018 futures contracts, climbed 6¢ to $3.381/MMBtu.

U.S. supply increases slightly. According to data from PointLogic, the average total supply of natural gas rose by 1% compared with the previous week. Dry natural gas production remained constant week over week. Average net imports from Canada increased by 5% from last week.

This report week is the second week that net imports from Canada have increased because of reduced exports on the Vector Pipeline, which begins southwest of Chicago and runs to Dawn Hub in Ontario. Vector is under Phase 2 of its maintenance project, which is projected to last through May 18, during which time flows will be highly restricted. This maintenance will allow Vector to connect with the Rover Pipeline, which was part of a batch of projects certificated by FERC earlier this year.

Demand falls slightly. Total U.S. consumption of natural gas fell by 1% compared with the previous report week, according to data from PointLogic. Week over week, power burn declined by 8, industrial sector consumption stayed constant at 20.5 Bcf/d, and residential/commercial sector demand increased by 11%. Natural gas exports to Mexico decreased 3%.

U.S. LNG exports increased. Four vessels (combined LNG-carrying capacity of 14.2 Bcf) departed Sabine Pass last week (Thursday to Wednesday), compared with three vessels last report week.

more price data

Storage:

Elevated consumption of natural gas likely results in smaller-than-average net injections into working gas storage. Net injections into storage totaled 45 Bcf, compared with the five-year (2012–16) average net injection of 73 Bcf and last year's net injections of 58 Bcf during the same week. Net injections fell below the five-year average in the Midwest and South Central regions by 14 Bcf and 16 Bcf, respectively, on the week. Continued heating demand for natural gas in the Midwest region likely depressed net injections of natural gas compared with the five-year average, while warmer temperatures in the southern parts of the Lower 48 states likely resulted in some increases in cooling demand, and consequently, smaller-than-normal injections for the report week. Net injections in the Pacific region also fell to 3 Bcf lower than the five-year average, likely as a result of the continued injections restrictions at Aliso Canyon. The weekly net change in the East region topped the five-year average by 3 Bcf and the Mountain region matched its five-year average net injection of 2 Bcf for the week.

Working gas levels are 14% lower than last year's record levels, but well ahead of the five-year average. Working gas levels are 372 Bcf lower than last year's levels at this time. This year-over-year deficit prevails in each of the regions of the Lower 48 states. The South Central region has the largest year-over-year deficit—145 Bcf. The East region has the largest deficit in relative terms, at 116 Bcf, 25% lower than last year's stock level. The Midwest region is 56 Bcf lower than last year at this time and the Pacific region is 49 Bcf lower than last year's level. In contrast, working gas levels are 275 Bcf higher than the five-year average in the Lower 48 states and are higher than the five-year average in all regions except the East and the Pacific regions, which are 46 Bcf and 19 Bcf lower than the five-year average, respectively. The South Central region accounts for 204 Bcf of the surplus compared with the five-year average, and the Midwest region is 106 Bcf higher than the five-year average.

The January futures price is trading at a premium over the current spot price, but the premium is well behind last year's level at this time. During the most recent storage week, the average natural gas spot price at the Henry Hub was $3.12/MMBtu, while the Nymex futures price of natural gas for delivery in January 2018 averaged $3.58/MMBtu, a difference of 46¢. The premium was $1.13/MMBtu a year ago. The price premium provides incentives for continued injections of natural gas into storage.

Reported net injections are lower than the range of market expectations for the week, prices on the Nymex rise in an early flurry of trading. According to the May 10, 2017, issue of The Desk survey of natural gas analysts, estimates of net injections to working natural gas storage ranged from 49 Bcf to 59 Bcf, with a median of 54 Bcf. Prices of the Nymex futures contracts for June 2017 delivery at Henry Hub increased 3¢/MMBtu to $3.37/MMBtu in 1,274 trades moments ahead of the release of the Weekly Natural Gas Storage Report (WNGSR). Another 928 contracts were traded at the release, with prices maintaining the higher price level. Prices varied in subsequent trading, increasing to $3.38/MMBtu.

Temperatures were higher-than-normal in most parts of the Lower 48 states, but significantly cooler-than-normal in the Midwest. Temperatures in the Lower 48 states averaged 60°F, 2°F higher than the normal and 3°F higher than last year at this time. Temperatures were significantly higher than normal in the key gas-consuming Northeast region, where the New England and Middle Atlantic Census Divisions were 6°F and 7°F, respectively, higher than normal. However, the East and West North Central Census Divisions were 3°F and 7°F lower than normal, respectively. The South Atlantic and East South Central also were significantly higher than normal, posting average temperatures of 72°F and 67°F, respectively, which suggests some cooling demand for natural gas in these regions.

more storage data

See also:

• Natural Gas Analysis Reports
• Short-Term Energy Outlook