Natural Gas

Overview:

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

• Natural gas spot prices fell at most locations this report week (Wednesday, January 3 to Wednesday, January 10). The Henry Hub spot price fell from $6.88/MMBtu last Wednesday to $3.11/MMBtu yesterday.
• At the New York Mercantile Exchange (Nymex), the February 2018 contract price fell 10¢ from $3.008/MMBtu last Wednesday to $2.906/MMBtu yesterday.
• Record breaking net withdrawals from working gas totaled 359 billion cubic feet (Bcf) for the week ending January 5. Working natural gas stocks are 2,767 Bcf, which is 12% lower than the year-ago level and 13% lower than the five-year (2013–17) average for this week.
• The natural gas plant liquids composite price at Mont Belvieu, Texas, fell by 22¢, averaging $8.26/MMBtu for the week ending January 10. The price of natural gasoline, propane, butane, and isobutane fell by 2%, 3%, 8%, and 6%, respectively. The price of ethane rose by 7%.
• According to Baker Hughes, for the week ending Tuesday, January 2, the natural gas rig count remained flat at 182. The number of oil-directed rigs fell by 5 to 742. The total rig count decreased by 5, and it now stands at 924.

more summary data

Prices/Supply/Demand:

Prices fall across the country as temperatures increase. This report week (Wednesday, January 3 to Wednesday, January 10), spot prices fell across the country as much colder-than-normal temperatures east of the Rockies moderated. The Henry Hub spot price fell $3.77 from $6.88/MMBtu last Wednesday to $3.11/MMBtu yesterday, with a low of $2.87/MMBtu on Monday. At the Chicago Citygate, prices decreased $3.46 from $6.49/MMBtu last Wednesday to $3.03/MMBtu yesterday. Prices at PG&E Citygate in Northern California fell 21¢, down from $3.08/MMBtu last Wednesday to $2.87/MMBtu yesterday. The price at SoCal Citygate decreased $3.01 from $6.15/MMBtu last Wednesday to $3.14/MMBtu yesterday.

Northeast price points spike during winter storm. At the Algonquin Citygate, which serves Boston-area consumers, prices fell $33.74 from $38.22/MMBtu last Wednesday to $4.48/MMBtu yesterday. Prices at Algonquin reached a high on Thursday of $78.98/MMBtu, as the Northeast coasts were hit by severe winter weather. In addition, the Pilgrim Nuclear Power Station in Plymouth, Massachusetts, was taken offline on Thursday during the storm after some transmission lines were damaged, increasing demand for natural gas-fired electric generation. The Pilgrim plant has an electricity capacity of 683 megawatts and was reconnected to the grid Wednesday evening.

Spot prices at Transcontinental Pipeline Zone 6 trading point for New York reached an all-time high on Thursday, averaging $140.06/MMBtu. The previous record was $128.31/MMBtu ($121.68/MMBtu in 2014 dollars) in January 2014, during a polar vortex event. Over the week, prices at Transco Zone 6 decreased $45.16 from $48.38/MMBtu last Wednesday to $3.22/MMBtu yesterday. Tennessee Zone 4 Marcellus spot prices decreased $3.21 from $5.75/MMBtu last Wednesday to $2.54/MMBtu yesterday. Prices at Dominion South in northwest Pennsylvania fell $3.17 from $5.86/MMBtu last Wednesday to $2.69/MMBtu yesterday.

Future prices fall. At the Nymex, the price of the February 2018 contract decreased 10¢, from $3.008/MMBtu last Wednesday to $2.906/MMBtu yesterday. The price of the 12-month strip averaging February 2018 through January 2019 futures contracts declined 5¢ to $2.830/MMBtu.

Supply remains flat. According to data from PointLogic Energy, the average total supply of natural gas remained the same as the previous report week, averaging 82.3 Bcf/d. Dry natural gas production grew by 2% compared with the previous report week, partly as a result of a reduction in well freeze-offs from last week. Average net imports from Canada decreased by 20% from last week.

Demand falls. Domestic demand fell across nearly all sectors, as temperatures moderated from the previous week’s cold. Total U.S. consumption of natural gas fell by 14% compared with the previous report week, according to data from PointLogic Energy, and on Monday fell below 100 Bcf/d for the first time since December 25. Natural gas consumed for power generation declined by 10% week over week, and industrial sector consumption decreased by 7% week over week after hitting an all-time high on January 1. In the residential and commercial sectors, consumption declined by 19%. Natural gas exports to Mexico increased 2%.

U.S. liquefied natural gas (LNG) exports decrease week over week. Three LNG vessels (LNG-carrying capacity 10.4 Bcf combined) departed the Sabine Pass liquefaction facility last week (Thursday to Wednesday) and one tanker (LNG-carrying capacity 3.4 Bcf) was loading at the terminal on Wednesday.

The start-up of Dominion Energy’s Cove Point liquefaction terminal in Lusby, Maryland, is now anticipated for early spring, according to a report by Bloomberg.

more price data

Storage:

Weekly withdrawals break the 300 Bcf level for the first time. Net withdrawals from storage totaled 359 Bcf for the week ending January 5, compared with the five-year (2013–17) average net withdrawals of 169 Bcf and last year's net withdrawals of 136 Bcf during the same week. Working gas stocks totaled 2,767 Bcf, which is 382 Bcf less than the five-year average and 415 Bcf less than last year at this time. Working gas levels are lower than the five-year averages in all regions for this time of year.

Record level withdrawals reported in all regions except for the Pacific. The East and Midwest regions exceeded the previous record high by 10 Bcf (15%) and 14 Bcf (17%), respectively. Withdrawals in the South Central salt and nonsalt regions totaled 78 Bcf and 76 Bcf, respectively and surpassed the previous record levels by 30 Bcf and 10 Bcf, respectively.

The February 2018 futures contract trades at a discount to the current spot price. During the most recent storage week, the average natural gas spot price at the Henry Hub was $5.38/MMBtu, $2.41 higher than the front-month futures price on the Nymex. A year ago, the spot price was the same as the front-month contract. This pricing pattern provided economic incentives to withdraw natural gas from storage to avoid exposure to the spot market.

Reported net implied flows out of storage are near the higher end of analysts’ expectations, and prices on the Nymex rise following the release of the Weekly Natural Gas Storage Report. According to the Desk survey of natural gas analysts, estimates of the weekly net change in working natural gas storage ranged from 305 Bcf to 365 Bcf, with a median of 335 Bcf. Prices for the futures contract for February delivery rose about 3¢/MMBtu, averaging $3.04/MMBtu, at the release of the Weekly Natural Gas Storage Report, with 1,117 contracts traded. Prices remained close to this level in subsequent trading.

Temperatures are significantly lower than normal in most of the Lower 48 states during the storage week. Temperatures in the Lower 48 states averaged 23 degrees Fahrenheit (°F), 10°F lower than the normal and 16°F lower than last year at this time. Temperatures in the heavy natural gas-consuming areas of the Midwest and Northeast were significantly colder than normal—averaging less than 13°F during the week— contributing to an increased demand for natural gas.

more storage data

See also:

• Natural Gas Analysis Reports
• Short-Term Energy Outlook