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Natural Gas Weekly Update

for week ending May 9, 2018   |  Release date:  May 10, 2018   |  Next release:  May 17, 2018   |   Previous weeks


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

In the News:

Natural gas sold at negative prices on TransCanada’s Alberta System

The average spot price for deliveries at Western Canada’s AECO C price point declined to US -$0.01 per million British thermal unit (MMBtu) on Friday, May 4, according to price data from Natural Gas Intelligence (NGI). AECO C is a virtual trading point that includes all trades on TransCanada's Alberta pipeline system (also known as the NOVA system). The pipeline system transports natural gas produced in Alberta and British Columbia to demand markets in eastern Canada and the United States.

This report week is the first time NGI has reported a negative daily volume-weighted average spot price at AECO C, though the average spot price was $0.00/MMBtu on October 6, 2017. Sporadic spot trades with negative prices occurred on May 3, 2018, but the overall price that day averaged $0.14/MMBtu. NGI’s price history of AECO C includes only three other days when intra-day negative spot prices occurred, all of which were in the fall of 2017. The lowest price reported on any of these days was -$0.29/MMBtu on September 26, 2017.

Negative natural gas prices are rare as they represent a producer paying a customer to take natural gas. Negative and near-zero pricing generally occur because produced natural gas volumes exceed available takeaway capacity. Natural gas flows out of western Canada have been facing seasonal maintenance constraints along NOVA, limiting flows out of Alberta to eastern Canada and to the U.S. Midwest. High natural gas storage inventories in western Canada combined with production growth and lower, shoulder-season demand contributed to downward pressure on spot prices at AECO C. As a result, many western Canadian producers must either find other destinations for their natural gas or shut down operations.

Producers may continue to operate despite the low natural gas prices, depending on if costs associated with shutting down operations are too high or if revenues from associated hydrocarbons (e.g., crude oil or natural gas liquids) exceed natural gas-related losses. Some producers in Canada target higher-priced natural gas liquids, making the natural gas a relative by-product to the production process.

According to Canada’s National Energy Board, marketed natural gas production in Alberta and British Columbia increased from 14.6 billion cubic feet per day (Bcf/d) in 2016 to 15.1 Bcf/d in 2017 (3.6% increase). Contributing to this growth are wells focused on producing natural gasoline and condensate for use as a crude oil diluent (a compound mixed with bitumen to facilitate transportation via pipeline). According to the governments of Alberta and British Columbia, average production of natural gasoline and condensate in the two provinces grew from 240,000 barrels per day (b/d) in 2016 to 290,000 b/d in 2017 (21% increase).

Most natural gas at AECO C is not sold on a spot basis. In 2017, the volume of natural gas included in NGI’s AECO C price index averaged 0.96 Bcf/d over all trading days. This volume is equivalent to about 13% of the total export capacity out of Alberta (at the Empress/McNeill border point and on the Foothills pipeline) or 6% of average 2017 marketed production of natural gas in Alberta and British Columbia.

Overview:

(For the Week Ending Wednesday, May 9, 2018)

  • Natural gas spot prices fell at most locations this report week (Wednesday, May 2 to Wednesday, May 9). The Henry Hub spot price was stable, dropping only 1¢ from $2.73/MMBtu last Wednesday to $2.72/MMBtu yesterday. The average Henry Hub price for the week fell, from $2.76/MMBtu last report week to $2.71/MMBtu this report week.
  • At the New York Mercantile Exchange (Nymex), the June 2018 contract price also remained relatively flat, falling only 2¢ from $2.754/MMBtu last Wednesday to $2.737/MMBtu yesterday.
  • Net injections to working gas totaled 89 Bcf for the week ending May 4. Working natural gas stocks are 1,432 Bcf, which is 38% lower than the year-ago level and 27% lower than the five-year (2013–17) average for this week.
  • The natural gas plant liquids composite price at Mont Belvieu, Texas, fell by 16¢, averaging $7.99/MMBtu for the week ending May 9. The price of ethane, propane, and isobutane fell by 5%, 3%, and 3%, respectively. The price of natural gasoline rose by 2%. The price of butane remained flat week over week.
  • According to Baker Hughes, for the week ending Tuesday, May 1, the natural gas rig count increased by 1 to 196. The number of oil-directed rigs rose by 9 to 834. The total rig count increased by 11, and it now stands at 1032.

more summary data

Prices/Supply/Demand:

Spot prices look to warmer weather. Natural gas spot prices at the Henry Hub—the U.S. benchmark price for natural gas—decreased only 1¢ from $2.73 per million British thermal units (MMBtu) last Wednesday to $2.72/MMBtu yesterday. Most parts of the Lower 48 states are expected to be warmer today than they were last Thursday, May 3, particularly in the southwest. The average Henry Hub price for the week fell from $2.76/MMBtu over last report week to $2.71/MMBtu over this report week. This price decline correlates with forecasts that indicate average temperatures over this report week will be 5°F (degrees Fahrenheit) to 10°F warmer than the last report week for most of the Lower 48.

Northeast prices decrease with increased temperatures. Prices at the Algonquin Citygate—the trading hub serving the greater-Boston area—decreased 35¢ from $2.62/MMBtu last Wednesday to $2.27/MMBtu yesterday, and the average price for the week also fell, from $2.62/MMBtu last report week to $2.28/MMBtu this report week. Prices at the Transcontinental Pipeline Zone 6 (New York) decreased 7¢ from $2.76/MMBtu last report week to $2.69 this report week, and the average price for the week fell from $2.50/MMBtu last report week to $2.44/MMBtu this report week.

Appalachian prices decrease with warmer weather and lower national demand. Prices at Dominion North decreased 10¢ from $2.20/MMBtu last report week to $2.10/MMBtu this report week. With increasing temperatures, the average price for the week fell 21¢ from $2.27/MMBtu last report week to $2.05/MMBtu this report week, which further widened the discount in prices between the Appalachian Basin and the Henry Hub.

California Wednesday-over-Wednesday prices decreased, and average week-over-week prices increased. Prices at the SoCal Citygate decreased 50¢ from $3.62/MMBtu last report week to $3.12/MMBtu this report week. Last Wednesday the Southern California Gas Company (SoCalGas) delivered more natural gas to customers than the company received on pipelines and withdrew from storage inventories to meet demand; yesterday receipts exceeded demand and the surplus was injected into storage. The average price for the week increased 10¢ from $3.06/MMBtu last report week to $3.15/MMBtu this report week. Demand for natural gas in Southern California mostly decreased throughout last report week but began to increase over the second part of this report week as daily average temperatures rose to as high as 80°F in parts of Southern California.

Week-over-week supply is flat, but year-over-year supply is up. 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. Average net imports from Canada increased by 2% from last week. Overall supply this week compared to last week increased 11%, led by a 13% increase in dry production, which more than offset the decline in net imports from Canada and LNG imports.

Overall demand decreases, but electric power generation rises. Total U.S. consumption of natural gas fell by 4% compared with the previous report week, according to data from PointLogic Energy. The decrease was driven largely by a 37% combined decrease in consumption in the residential and commercial sectors because of warmer weather. However, with the increased temperatures, natural gas consumed for power generation climbed by 14% week over week, with the largest increase in natural gas use for electric power generation coming from the southeast, according to S&P Global Platts. Industrial sector consumption decreased by 3% week over week.

U.S. liquefied natural gas (LNG) exports increase week over week. Six LNG vessels (combined LNG-carrying capacity 21 Bcf) departed the United States from May 3 to May 9 (four tankers from Sabine Pass liquefaction terminal and two tankers from Cove Point). Two vessels (combined LNG-carrying capacity 7.3 Bcf) were loading on Wednesday, May 9—one at Sabine Pass and one at Cove Point.

more price data

Storage:

Working gas storage begins refilling after an unprecedented series of April withdrawals. Net injections into storage totaled 89 Bcf for the week ending May 4, compared with the five-year (2013–17) average net injection of 75 Bcf and last year's net injections of 49 Bcf during the same week. Unusally cold weather for most of April resulted in net withdrawals from storage for the first three weeks of the month. In EIA’s weekly data published in the Weekly Natural Gas Storage Report (WNGSR), which dates back to 1993, there have never been three consecutive April weekly withdrawals. Working gas stocks totaled 1,432 Bcf, which is 520 Bcf lower than the five-year average and 863 Bcf lower than last year at this time.

Despite low storage inventories, the average January 2019 futures contract price trades at a smaller premium to the average spot price than last year at this time. During the most recent storage week, the average natural gas spot price at the Henry Hub averaged $2.72/MMBtu, while the Nymex futures price of natural gas for delivery in January 2019 averaged $3.04/MMBtu, 31¢/MMBtu higher than the spot price. A year ago, the January contract was 47¢/MMBtu higher than the spot price. These pricing patterns reflect the relative economics supporting injections into working gas storage.

Reported net injection into storage is close to the median of analyst expections. According to the Desk survey of natural gas analysts, estimates of the weekly net change from working natural gas storage ranged from net injections of 83 Bcf to 114 Bcf, with a median estimate of 92 Bcf. At the 10:30 a.m. release of the WNGSR, 12,028 trades were executed, increasing the Nymex price for June delivery by about 1¢ to $2.77/MMBtu. Prices rose another penny in subsequent trading, averaging $2.78/MMBtu.

Temperatures are in the normal range for the storage week. Temperatures in the Lower 48 states averaged 58 degrees Fahrenheit (°F), the same as the normal and 2°F lower than last year at this time. Tempertures were 3°F warmer on average than the previous report week.

more storage data

See also:



Natural gas spot prices
Spot Prices ($/MMBtu)
Thu,
03-May
Fri,
04-May
Mon,
07-May
Tue,
08-May
Wed,
09-May
Henry Hub
2.69
2.69
2.71
2.72
2.72
New York
2.69
2.07
2.63
2.55
2.69
Chicago
2.42
2.33
2.36
2.38
2.41
Cal. Comp. Avg.*
2.17
2.14
2.35
2.29
2.17
Futures ($/MMBtu)
June contract
2.726
2.711
2.741
2.732
2.737
July contract
2.759
2.741
2.767
2.760
2.760
*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: (5/3/18 - 5/9/18)
Average daily values (Bcf/d):
this week
last week
last year
Marketed production
90.1
90.1
80.0
Dry production
79.9
79.8
71.0
Net Canada imports
6.0
5.9
6.5
LNG pipeline deliveries
0.1
0.1
0.1
Total supply
85.9
85.7
77.5

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: (5/3/18 - 5/9/18)
Average daily values (Bcf/d):
this week
last week
last year
U.S. consumption
55.3
57.8
57.5
    Power
26.6
23.3
22.5
    Industrial
19.9
20.4
20.4
    Residential/commercial
8.9
14.1
14.7
Mexico exports
4.4
4.3
4.1
Pipeline fuel use/losses
6.2
6.1
6.5
LNG pipeline receipts
3.3
3.8
2.3
Total demand
69.3
71.9
70.3

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, May 01, 2018
Change from
 
last week
last year
Oil rigs
834
1.1%
18.6%
Natural gas rigs
196
0.5%
13.3%
Note: Excludes any miscellaneous rigs
Rig numbers by type
Tue, May 01, 2018
Change from
 
last week
last year
Vertical
55
5.8%
-27.6%
Horizontal
913
1.3%
24.4%
Directional
64
-5.9%
-4.5%
Source: Baker Hughes Inc.


Working gas in underground storage
Stocks
billion cubic feet (Bcf)
Region
2018-05-04
2018-04-27
change
East
243
223
20
Midwest
240
221
19
Mountain
92
86
6
Pacific
195
187
8
South Central
662
626
36
Total
1,432
1,343
89
Source: U.S. Energy Information Administration
Working gas in underground storage
Historical comparisons
Year ago
(5/4/17)
5-year average
(2013-2017)
Region
Stocks (Bcf)
% change
Stocks (Bcf)
% change
East
346
-29.8
347
-30.0
Midwest
523
-54.1
398
-39.7
Mountain
155
-40.6
127
-27.6
Pacific
237
-17.7
246
-20.7
South Central
1,033
-35.9
832
-20.4
Total
2,295
-37.6
1,952
-26.6
Source: U.S. Energy Information Administration


Temperature – heating & cooling degree days (week ending May 03)
 
HDD deviation from:
 
CDD deviation from:
Region
HDD Current
normal
last year
CDD Current
normal
last year
New England
82
-16
31
0
0
-4
Middle Atlantic
68
-13
42
7
6
0
E N Central
78
-7
-16
1
-1
1
W N Central
73
-2
-57
2
-3
2
South Atlantic
22
-13
16
31
7
-32
E S Central
33
1
19
12
-1
-21
W S Central
22
12
3
23
-12
-15
Mountain
78
-9
-31
8
-5
-3
Pacific
67
16
44
0
-5
-10
United States
61
-2
7
11
-1
-10
Note: HDD = heating degree day; CDD = cooling degree day

Source: National Oceanic and Atmospheric Administration

Average temperature (°F)

7-Day Mean ending May 03, 2018

Mean Temperature (F) 7-Day Mean ending May 03, 2018

Source: NOAA National Weather Service

Deviation between average and normal (°F)

7-Day Mean ending May 03, 2018

Mean Temperature Anomaly (F) 7-Day Mean ending May 03, 2018

Source: NOAA National Weather Service