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Natural Gas Weekly Update

for week ending December 19, 2018   |  Release date:  December 20, 2018   |  Next release:  January 10, 2019   |   Previous weeks


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

In the News:

Low natural gas storage stocks contribute to recent natural gas futures price volatility

While the volatility of the Nymex near-month natural gas futures prices at the Henry Hub was low for most of 2018, it has increased significantly since October. The rise in natural gas price volatility coincides with historically low pre-winter levels of working natural gas storage stocks and rising natural gas consumption relative to current natural gas production levels.

During most of 2018, record natural gas production moderated natural gas prices and natural gas price volatility. The January 2019 natural gas futures price averaged about $3.12 per million British thermal units (MMBtu) from April through October despite relatively low natural gas inventories, partly because of natural gas production gains. Low winter natural gas futures prices may have reduced the economic incentive for storage customers to inject natural gas over the summer at underground storage facilities for use in winter. Natural gas storage stocks ended the refill season (October 31) at 3,208 Bcf, their lowest level in 13 years.

However, natural gas fundamentals shifted during October, driving up natural gas futures price volatility. Cold weather in November led to increases in residential and commercial consumption, along with already high levels of net natural gas exports and natural gas use in the electric sector. Together, this rise in consumption led to sizable early winter natural gas storage withdrawals, which further increased the storage deficit relative to the previous five-year average (covering 2013 through 2017).

For the first nine months of 2018, the average daily price range, or difference between the daily high and low value, for the Nymex near-month natural gas futures contract was 8¢ per million British thermal unit (MMBtu); the daily price range averaged 10¢/MMBtu for the same period in 2017. In the final quarter of the 2018, the average range jumped to 22¢/MMBtu, with several trading days in the middle of November seeing ranges nearing $1.00/MMBtu. Inter-day trading, or the difference between average prices on consecutive days, was also unusually stable during much of 2018, averaging 4¢ per day in absolute value terms for the first three quarters of the year, compared to 6¢ per day in the first three quarters of 2017. In contrast, thus far in the final quarter of 2018, the average absolute value of inter-day trading has increased to 11¢, compared to 6¢ in the fourth quarter of 2017. By this metric, natural gas price volatility rose to its highest level since 2009.

Overview:

(For the Week Ending Wednesday, December 19, 2018)

  • Natural gas spot prices fell at most locations this report week (Wednesday, December 12 to Wednesday, December 19). Henry Hub spot prices fell from $4.20 per million British thermal units (MMBtu) last Wednesday to $3.56/MMBtu yesterday.
  • At the Nymex, the price of the January 2019 contract decreased 41¢, from $4.136/MMBtu last Wednesday to $3.726/MMBtu yesterday. The price of the 12-month strip averaging January 2019 through December 2019 futures contracts declined 12¢/MMBtu to $3.050/MMBtu.
  • Net withdrawals from working gas totaled 141 billion cubic feet (Bcf) for the week ending December 14. Working natural gas stocks are 2,773 Bcf, which is 20% lower than the year-ago level and 21% lower than the five-year (2013–17) average for this week.
  • The natural gas plant liquids composite price at Mont Belvieu, Texas, fell by 52¢/MMBtu, averaging $6.21/MMBtu for the week ending December 19. The price of natural gasoline, ethane, propane, butane, and isobutane all fell, by 5%, 9%, 6%, 10%, and 13%, respectively.
  • According to Baker Hughes, for the week ending Tuesday, December 11, the natural gas rig count remained flat at 198. The number of oil-directed rigs fell by 4 to 873. The total rig count decreased by 4, and it now stands at 1,071.

more summary data

Prices/Supply/Demand:

Prices fall across the Lower 48 states with warmer-than-normal weather. This report week (Wednesday, December 12 to Wednesday, December 19), Henry Hub spot prices fell 64¢ from $4.20/MMBtu last Wednesday to their weekly low of $3.56/MMBtu yesterday. Prices have declined during the report week as temperatures were warmer than normal across the Lower 48 states and much warmer than normal across the Great Plains. At the Chicago Citygate, prices decreased 68¢ from $3.99/MMBtu last Wednesday to $3.31/MMBtu yesterday. Prices at PG&E Citygate in Northern California fell 28¢, down from $4.46/MMBtu last Wednesday to $4.18/MMBtu yesterday. Prices at SoCal Citygate decreased 47¢ from $6.56/MMBtu last Wednesday to $6.09/MMBtu yesterday.

Northeast prices fall after cold front passes. Prices declined during the report week as temperatures warmed. At the Algonquin Citygate, which serves Boston-area consumers, prices went down $3.30 from $7.15/MMBtu last Wednesday to their weekly low of $3.85/MMBtu yesterday. At the Transcontinental Pipeline Zone 6 trading point for New York City, prices decreased 76¢ from $4.39/MMBtu last Wednesday to $3.63/MMBtu yesterday.

Tennessee Zone 4 Marcellus spot prices decreased 71¢ from $3.99/MMBtu last Wednesday to $3.28/MMBtu yesterday. Prices at Dominion South in southwest Pennsylvania fell 75¢ from $3.97/MMBtu last Wednesday to $3.22/MMBtu yesterday.

Discount at Permian Basin trading hub persists. Prices at the Waha Hub in West Texas, which is located near Permian Basin production activities, averaged $1.99/MMBtu last Wednesday, $2.21/MMBtu lower than Henry Hub prices. Yesterday, prices at the Waha Hub averaged $1.52/MMBtu, $2.04/MMBtu lower than Henry Hub prices. The discount reached an annual high in the last week of November.

Enbridge works to restore service following pipeline explosion in Tennessee. On Saturday, December 15, a 22-inch natural gas pipeline exploded in Pleasant Shade, Tennessee, on Enbridge’s East Tennessee Natural Gas system (ETNG). There were no injuries, and Genscape data showed flows dropped from an average of 300 million cubic feet per day (MMcf/d) to zero at the Dixon Springs compressor station, located 40 miles northwest of Nashville, Tennessee. Prices at Tenn Zone 1 100L declined from $3.75/MMBtu on Friday to $3.34/MMBtu on Wednesday. The Pipeline and Hazardous Materials Safety Administration (PHMSA) is conducting an investigation and working with Enbridge on a restoration plan.

Supply falls. According to data from PointLogic Energy, the average total supply of natural gas fell by 1% compared with the previous report week. Dry natural gas production remained constant week over week. Average net imports from Canada decreased by 3% from last week.

Demand falls, driven by decline in residential and commercial consumption. Total U.S. consumption of natural gas fell by 16% compared with the previous report week, according to data from PointLogic Energy. The largest decrease in consumption came in the residential and commercial sectors, where natural gas use declined by 25% with warmer-than-normal weather across the Lower 48 states. Natural gas consumed for power generation declined by 11% week over week. Industrial sector consumption decreased by 3% week over week. Natural gas exports to Mexico decreased 2%.

U.S. LNG exports decline week over week. Seven LNG vessels (six from the Sabine Pass liquefaction terminal, and one from Cove Point) with a combined LNG-carrying capacity of 24.7 Bcf departed the United States from December 13 to December 19, and one vessel was loading at Sabine Pass on Wednesday, according to Bloomberg shipping data.

On Tuesday, Cheniere Energy, the developer of the Sabine Pass liquefaction facility in Louisiana, announced it will sell LNG from Train 6 to Malaysia’s Petronas in a 20-year deal. Train 6 has been approved but is not yet under construction.

U.S. LNG imports into Cove Point will continue later this month. One LNG cargo is scheduled to be delivered to Cove Point in Maryland later this month, according to Bloomberg shipping data. The cargo was loaded at the Bonny terminal in Nigeria and is en route to Maryland, according to Bloomberg.

Storage:

Net withdrawals from working gas storage are lower than the five-year average for the second week in a row. Net withdrawals from storage totaled 141 Bcf for the week ending December 14, compared with the five-year (2013–17) average net withdrawals of 144 Bcf and last year's net withdrawals of 166 Bcf during the same week. Working gas stocks totaled 2,773 Bcf, which is 720 Bcf lower than the five-year average and 697 Bcf lower than last year at this time.

Working gas stocks’ deficit to the five-year average decreased, and the deficit to the bottom of the five-year range increased. In the Lower 48 states, total working gas stocks are 450 Bcf lower than the five-year minimum, and every storage region is currently lower than the bottom of its five-year range. As of this report week, the Midwest region is 31 Bcf (4%) lower than the five-year minimum, and the South Central region―including both salt and nonsalt facilities―is 212 Bcf (20%) lower than the five-year minimum.

The average near-month futures contract price is trading at a discount to the average spot price, which provides incentive for storage withdrawals. Price differences between the spot price and the futures price at the Nymex indicate economic incentives for withdrawals from working gas. During the most recent storage week, the average natural gas spot price at the Henry Hub averaged $4.38/MMBtu while the Nymex futures price of natural gas for delivery in January 2019 averaged $4.26/MMBtu, 12¢/MMBtu lower than the spot price. A year ago, the January contract was 13¢/MMBtu higher than the spot price.

Reported net withdrawals into storage exceed the median of analysts’ expectations. According to The Desk survey of natural gas analysts, estimates of the weekly net change in working natural gas stocks ranged from net withdrawals of 118 Bcf to 153 Bcf, with a median estimate of 137 Bcf. At the 10:30 a.m. release of the Weekly Natural Gas Storage Report, the price of the Nymex futures contract for January delivery at the Henry Hub increased 3¢/MMBtu to $3.83/MMBtu in light trading, with 220 trades executed. The price varied in subsequent trading, averaging $3.82/MMBtu.

Temperatures were lower than normal for the storage week and significantly colder than the previous week. Temperatures in the Lower 48 states averaged 36 degrees Fahrenheit (°F), 2°F lower than normal and 1°F lower than last year at this time. Temperatures were 5°F colder than those reported for the previous week.

More storage data and analysis can be found on the Natural Gas Storage Dashboard and the Weekly Natural Gas Storage Report.

See also:



Natural gas spot prices
Spot Prices ($/MMBtu)
Thu,
13-Dec
Fri,
14-Dec
Mon,
17-Dec
Tue,
18-Dec
Wed,
19-Dec
Henry Hub
4.23
3.90
3.63
3.68
3.56
New York
4.17
3.86
4.28
3.85
3.63
Chicago
4.07
3.70
3.39
3.48
3.31
Cal. Comp. Avg.*
4.48
4.13
4.26
4.11
3.89
Futures ($/MMBtu)
January contract
4.124
3.827
3.528
3.838
3.726
February contract
4.027
3.753
3.453
3.742
3.653
*Avg. of NGI's reported prices for: Malin, PG&E Citygate, and Southern California Border Avg.
Sources: Natural Gas Intelligence and CME Group as compiled by Bloomberg, L.P.
Natural gas futures prices
Natural gas liquids spot prices


U.S. natural gas supply - Gas Week: (12/13/18 - 12/19/18)
Average daily values (Bcf/d):
this week
last week
last year
Marketed production
97.5
97.9
88.0
Dry production
87.2
87.6
78.8
Net Canada imports
4.6
4.8
6.3
LNG pipeline deliveries
0.2
0.2
0.3
Total supply
92.0
92.6
85.3

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: (12/13/18 - 12/19/18)
Average daily values (Bcf/d):
this week
last week
last year
U.S. consumption
80.3
95.0
91.9
    Power
22.3
25.0
25.6
    Industrial
23.6
24.5
24.3
    Residential/commercial
34.3
45.5
41.9
Mexico exports
4.5
4.6
4.5
Pipeline fuel use/losses
6.9
8.2
7.9
LNG pipeline receipts
4.2
4.6
3.0
Total demand
96.0
112.4
107.4

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, December 11, 2018
Change from
 
last week
last year
Oil rigs
873
-0.5%
16.9%
Natural gas rigs
198
0.0%
8.2%
Note: Excludes any miscellaneous rigs
Rig numbers by type
Tue, December 11, 2018
Change from
 
last week
last year
Vertical
71
1.4%
18.3%
Horizontal
927
-0.6%
15.7%
Directional
73
1.4%
5.8%
Source: Baker Hughes Inc.


Working gas in underground storage
Stocks
billion cubic feet (Bcf)
Region
2018-12-14
2018-12-07
change
East
692
732
-40
Midwest
841
885
-44
Mountain
153
160
-7
Pacific
227
238
-11
South Central
860
898
-38
Total
2,773
 2,914
-141
Source: Form EIA-912, "Weekly Underground Natural Gas Storage Report"
Working gas in underground storage
Historical comparisons
Year ago
(12/14/17)
5-year average
(2013-2017)
Region
Stocks (Bcf)
% change
Stocks (Bcf)
% change
East
817
-15.3
822
-15.8
Midwest
988
-14.9
972
-13.5
Mountain
205
-25.4
199
-23.1
Pacific
296
-23.3
319
-28.8
South Central
1,164
-26.1
1,181
-27.2
Total
3,470
-20.1
3,493
-20.6
Source: Form EIA-912, "Weekly Underground Natural Gas Storage Report"


Temperature – heating & cooling degree days (week ending Dec 13)
 
HDD deviation from:
 
CDD deviation from:
Region
HDD Current
normal
last year
CDD Current
normal
last year
New England
271
47
41
0
0
0
Middle Atlantic
248
35
12
0
0
0
E N Central
265
21
-9
0
0
0
W N Central
274
4
21
0
0
0
South Atlantic
188
39
5
5
-3
1
E S Central
180
26
-18
0
-1
0
W S Central
121
8
-18
1
-2
1
Mountain
206
-15
13
0
0
0
Pacific
103
-14
34
0
0
0
United States
205
15
8
1
-1
0
Note: HDD = heating degree day; CDD = cooling degree day

Source: National Oceanic and Atmospheric Administration

Average temperature (°F)

7-Day Mean ending Dec 13, 2018

Mean Temperature (F) 7-Day Mean ending Dec 13, 2018

Source: NOAA National Weather Service

Deviation between average and normal (°F)

7-Day Mean ending Dec 13, 2018

Mean Temperature Anomaly (F) 7-Day Mean ending Dec 13, 2018

Source: NOAA National Weather Service