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Natural Gas Weekly Update

for week ending March 28, 2018   |  Release date:  March 29, 2018   |  Next release:  April 5, 2018   |   Previous weeks


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

In the News:

Gross natural gas production in the Permian Basin has nearly doubled in the past four years

Gross natural gas production in the Permian Basin increased by 86% from March 2014 to March 2018, according to EIA’s most recent Drilling Productivity Report. Production in March 2018 is estimated at 10.0 billion cubic feet per day (Bcf/d), compared to an average of 5.4 Bcf/d in March 2014. This near-doubling in natural gas production in the Permian Basin has, in part, been driven by associated natural gas from oil wells. Permian oil production has also doubled from 1.5 million barrels per day (b/d) in March 2014 to 3.1 million b/d in March 2018. According to the Texas Railroad Commission, the associated natural gas share of total natural gas production in Texas grew from 31% in 2014 to 50% in 2017.

As Permian oil production grows, producers need to find outlets for the natural gas as takeaway capacity becomes further constrained. One option is flaring or venting the natural gas, although these processes are regulated by the Texas Railroad Commission and have some restrictions. Some natural gas can be reinjected into wells, and the remainder will go into pipelines.

The difference between natural gas spot prices in the Permian Basin and at the Henry Hub has generally widened as Permian production has increased, which is consistent with the lack of sufficient takeaway capacity for associated gas. From March 2014 through March 2017, spot prices at the Waha hub in the Permian Basin averaged 13¢ per million British thermal unit (MMBtu) lower than those at the Henry Hub in Louisiana. Since then, the differential has widened, with the Waha hub price averaging 76¢/MMBtu lower than the Henry Hub price from March 1–27, 2018.

Several new natural gas pipelines are currently planned from the Permian to the Gulf Coast, which may affect the Waha-Henry Hub price differential. These projects include the Gulf Coast Express Pipeline (2.0 Bcf/d capacity), the Permian-Katy Pipeline (1.7 to 2.3 Bcf/d capacity), the Pecos Trail Pipeline (1.9 Bcf/d capacity), and the Permian Global Access Pipeline (2.0 Bcf/d capacity). Many proposed pipelines from the Permian target new LNG export demand.

Overview:

(For the Week Ending Wednesday, March 28, 2018)

  • Natural gas spot prices fell at most locations with warmer weather this report week (Wednesday, March 21 to Wednesday, March 28). The Henry Hub spot price fell from $2.70/MMBtu last Wednesday to $2.64/MMBtu yesterday.
  • At the Nymex, the April 2018 contract expired Tuesday at $2.691/MMBtu. The May 2018 contract price increased to $2.698/MMBtu, up 3¢ Wednesday to Wednesday.
  • Net withdrawals from working gas totaled 63 Bcf for the week ending March 23. Working natural gas stocks are 1,383 Bcf, which is 33% lower than the year-ago level and 20% lower than the five-year (2013–17) average for this week.
  • The natural gas plant liquids composite price at Mont Belvieu, Texas, rose by 19¢, averaging $7.45/MMBtu for the week ending March 28. The price of natural gasoline and isobutane both rose by 3%, the price of propane and butane both rose by 2%, and the price of ethane rose by 4%.
  • According to Baker Hughes, for the week ending Tuesday, March 20, the natural gas rig count increased by 1 to 190. The number of oil-directed rigs rose by 4 to 804. The total rig count increased by 5, and it now stands at 995.

more summary data

Prices/Supply/Demand:

The Henry Hub spot price decreases with warmer weather and generally lower demand for heating. This report week (Wednesday, March 21 to Wednesday, March 28), the Henry Hub spot price fell 6¢ from $2.70/MMBtu last Wednesday to $2.64/MMBtu yesterday. The average price for the week decreased 4¢ from $2.64 last report week to $2.60/MMBtu this report week. There was lower demand for natural gas heating as weekly average temperatures in most of the Lower 48 states slightly increased compared to last report week.

Key Midwest trading hub prices also decrease with warmer weather. At the Chicago Citygate, prices decreased 17¢ from $2.57/MMBtu last Wednesday to $2.40/MMBtu yesterday. The average price for the week also decreased, falling 6¢ from $2.50/MMBtu last report week to $2.44/MMBtu this report week.

California prices decrease with warmer weather and lower demand. Prices throughout California generally decreased as statewide average temperatures were warmer this report week compared to last report week. The price for next-day delivery at SoCal Citygate decreased $1.40 from $3.82/MMBtu last Wednesday to $2.42/MMBtu yesterday, while forecast deliveries by the Southern California Gas Company (SoCalGas) decreased 14% from 2.8 Bcf last Thursday to 2.4 Bcf today. The average price for the week decreased 31¢, from $3.39/MMBtu last report week to $3.08/MMBtu this report week.

Prices at PG&E Citygate in Northern California fell 13¢, down from $2.69/MMBtu last Wednesday to $2.56/MMBtu yesterday. The average price for the week decreased 14¢ from $2.73/MMBtu last report week to $2.59/MMBtu this report week.

Southern California Border Average prices decreased 12¢ from $2.11/MMBtu last Wednesday to $1.99/MMBtu yesterday. The average price for the week decreased 7¢ from $2.11/MMBtu last report week to $2.04/MMBtu this report week.

Northeast prices decrease. At the Algonquin Citygate, which serves Boston-area consumers, prices went down $1.47 from $3.82/MMBtu last Wednesday to $2.35/MMBtu yesterday, while the average price for the week decreased $3.34 from $6.24/MMBtu last report week to $2.90/MMBtu this report week. Temperatures in New England and the broader Northeast are higher this report week compared to last report week and have sharply increased in the last half of this report week.

At the Transcontinental Pipeline Zone 6 trading point for New York, prices decreased 38¢ from $2.90/MMBtu last Wednesday to $2.52/MMBtu yesterday. The average price for the week decreased 24¢ from $2.97/MMBtu last report week to $2.73/MMBtu this report week.

Appalachian prices decrease. Tennessee Zone 4 Marcellus spot prices decreased 44¢ from $2.50/MMBtu last Wednesday to $2.06/MMBtu yesterday. The average price for the week decreased 16¢, from $2.44/MMBtu last report week to $2.28/MMBtu this report week.

Prices at Dominion South in northwest Pennsylvania fell 43¢ from $2.52/MMBtu last Wednesday to $2.09/MMBtu yesterday, while the average price for the week decreased 14¢ from $2.48/MMBtu last report week to $2.34/MMBtu this report week.

Both Tennessee Zone 4 Marcellus and Dominion South hubs typically trade lower than (at a discount to) the Henry Hub national benchmark price. The discount to the Henry Hub at both hubs was relatively flat over last report week and much of this report week. However, with warmer weather and lower demand for natural gas use for heating homes and businesses, prices at both hubs decreased more sharply relative to the Henry Hub in the last two days of this report week.

Nymex prices increase. At the Nymex, the April 2018 contract expired Tuesday at $2.691/MMBtu, up 5¢ from last Wednesday. The May 2018 contract increased to $2.698/MMBtu, up 3¢ from last Wednesday to yesterday. The price of the 12-month strip averaging May 2018 through April 2019 futures contracts climbed 2¢ to $2.857/MMBtu.

Supply is flat. According to data from PointLogic Energy, the average total supply of natural gas remained the same as in the previous report week, averaging 85.9 Bcf/d. Dry natural gas production remained constant week over week. With warmer weather in the Northeast and New England, average net imports from Canada decreased by 6% from last report week.

Demand decreases as warmer weather moves in across the Lower 48 states. Total U.S. consumption of natural gas fell by 4% compared with the previous report week, according to data from PointLogic Energy. Natural gas consumed for power generation was flat, averaging 23.2 Bcf/d. Industrial sector consumption decreased by 1% week over week. In the residential and commercial sectors, consumption declined by 9%. Natural gas exports to Mexico were the same as last week, averaging 4.3 Bcf/d.

U.S. liquefied natural gas (LNG) exports increase week over week. Five vessels (combined LNG-carrying capacity 18.2 Bcf) departed the Sabine Pass liquefaction facility from March 22 to March 28. Two vessels (combined LNG-carrying capacity 7.0 Bcf) were loading at the terminal on Wednesday.

Dominion Energy Cove Point liquefaction terminal is expecting a second LNG vessel, scheduled to dock at the terminal on April 9, according to ship tracking data compiled by Bloomberg. A third vessel is also en route to the terminal, with the expected arrival on April 20.

more price data

Storage:

Working gas net withdrawals are 17 Bcf higher than the five-year average. Net withdrawals from storage totaled 63 Bcf for the week ending March 23, compared with the five-year (2013–17) average net withdrawal of 46 Bcf and last year's net withdrawals of 58 Bcf during the same week. Working gas stocks totaled 1,383 Bcf, which is 346 Bcf lower than the five-year average and 672 Bcf lower than last year at this time.

Working gas levels are on pace to end the 2017–18 heating season at the second-lowest level since 2010. Working gas stocks have rebounded since falling to 59 Bcf lower than the five-year minimum range and 486 Bcf lower than the five-year average for the Lower 48 states on January 19, 2018. If net withdrawals from working gas stocks match the five-year average for the remainder of the withdrawal season, working gas stocks will total 1,356 Bcf by March 31, 2018, which is 17% lower than the five-year average. Working gas stocks ended the 2013–14 heating season at 837 Bcf, which is the lowest reported level for that time since 2010.

The average April 2018 futures contract price trades at a premium to the average weekly spot price. During the most recent storage week, the average natural gas spot price at the Henry Hub was $2.64/MMBtu, 1¢/MMBtu lower than the front-month futures price at the Nymex. A year ago, the spot price was 7¢/MMBtu lower than the front-month contract.

Reported withdrawals out of storage are lower than most analysts’ expectations. According to The Desk's survey of natural gas analysts, estimates of the weekly net change in working natural gas storage ranged from 61 Bcf to 82 Bcf, with a median of 68 Bcf. Prices for the futures contract for April delivery at the Henry Hub fell 1¢/MMBtu to $2.56/MMBtu in 639 trades following the release of the Weekly Natural Gas Storage Report. Prices varied somewhat in subsequent trading and were between $2.74/MMBtu and $2.75/MMBtu.

Temperatures are somewhat lower than normal in most regions during the storage week. Temperatures in the Lower 48 states averaged 44 degrees Fahrenheit (°F), 2°F lower than the normal and 3°F lower than last year at this time. The average temperature was slightly higher than during the prior storage week.

more storage data

See also:



Natural gas spot prices
Spot Prices ($/MMBtu)
Thu,
22-Mar
Fri,
23-Mar
Mon,
26-Mar
Tue,
27-Mar
Wed,
28-Mar
Henry Hub 2.62 2.56 2.58 2.60 2.64
New York 2.74 2.80 2.67 2.57 2.52
Chicago 2.48 2.42 2.38 2.40 2.40
Cal. Comp. Avg.* 2.31 2.20 2.19 2.17 2.19
Futures ($/MMBtu)
April Contract 2.617 2.591 2.618 2.691 Expired
May Contract 2.656 2.633 2.657 2.714 2.698
June Contract 2.828 2.806 2.828 2.871 2.751
*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: (3/22/18 - 3/28/18)
Average daily values (Bcf/d):
this week
last week
last year
Marketed production
89.4
89.3
79.3
Dry production
79.2
79.2
70.9
Net Canada imports
6.4
6.9
5.6
LNG pipeline deliveries
0.3
0.2
0.1
Total supply
85.9
86.2
76.7

Source: OPIS PointLogic Energy, an IHS Company
Note: LNG pipeline deliveries represent gas sendout from LNG import terminals.

U.S. natural gas consumption - Gas Week: (3/22/18 - 3/28/18)
Average daily values (Bcf/d):
this week
last week
last year
U.S. consumption
73.7
76.7
65.4
    Power
23.2
23.2
21.6
    Industrial
21.6
21.8
20.8
    Residential/commercial
29.0
31.7
23.0
Mexico exports
4.3
4.3
4.2
Pipeline fuel use/losses
6.5
6.7
5.7
LNG pipeline receipts
3.3
3.2
1.9
Total demand
87.8
90.9
77.3

Source: OPIS PointLogic Energy, an IHS Company
Note: LNG pipeline receipts represent pipeline deliveries to LNG export terminals.

Natural gas supply


Weekly natural gas rig count and average Henry Hub
Rigs
Tue, March 20, 2018
Change from
 
last week
last year
Oil rigs
804
0.5%
23.3%
Natural gas rigs
190
0.5%
22.6%
Note: Excludes any miscellaneous rigs
Rig numbers by type
Tue, March 20, 2018
Change from
 
last week
last year
Vertical
63
10.5%
-19.2%
Horizontal
870
0.6%
29.3%
Directional
62
-8.8%
6.9%
Source: Baker Hughes Inc.


Working gas in underground storage
Stocks
billion cubic feet (Bcf)
Region
2018-03-23
2018-03-16
change
East
242
270
-28
Midwest
284
315
-31
Mountain
88
90
-2
Pacific
166
169
-3
South Central
603
602
1
Total
1,383
1,446
-63
Source: U.S. Energy Information Administration
Working gas in underground storage
Historical comparisons
Year ago
(3/23/17)
5-year average
(2013-2017)
Region
Stocks (Bcf)
% change
Stocks (Bcf)
% change
East
282
-14.2
300
-19.3
Midwest
489
-41.9
370
-23.2
Mountain
140
-37.1
123
-28.5
Pacific
211
-21.3
218
-23.9
South Central
932
-35.3
718
-16.0
Total
2,055
-32.7
1,729
-20.0
Source: U.S. Energy Information Administration


Temperature – heating & cooling degree days (week ending Mar 22)
 
HDD deviation from:
 
CDD deviation from:
Region
HDD Current
normal
last year
CDD Current
normal
last year
New England
215
21
-9
0
0
0
Middle Atlantic
215
36
9
0
0
0
E N Central
191
3
-8
0
0
0
W N Central
187
1
39
0
-1
0
South Atlantic
121
17
-3
11
-1
5
E S Central
101
3
2
0
-5
-3
W S Central
39
-19
25
15
2
-21
Mountain
168
15
106
0
-2
-13
Pacific
116
29
63
0
-1
0
United States
154
13
23
4
-1
-2
Note: HDD = heating degree day; CDD = cooling degree day

Source: National Oceanic and Atmospheric Administration

Average temperature (°F)

7-Day Mean ending Mar 22, 2018

Mean Temperature (F) 7-Day Mean ending Mar 22, 2018

Source: NOAA National Weather Service

Deviation between average and normal (°F)

7-Day Mean ending Mar 22, 2018

Mean Temperature Anomaly (F) 7-Day Mean ending Mar 22, 2018

Source: NOAA National Weather Service