Natural Gas

Overview:

(For the week ending Wednesday, May 7, 2020)

• Natural gas spot price movements increased this report week (Wednesday, April 29, to Wednesday, May 6). The Henry Hub spot price rose from $1.70 per million British thermal units (MMBtu) last Wednesday to $1.88/MMBtu yesterday.
• At the New York Mercantile Exchange (Nymex), the price of the June 2020 contract increased 8¢, from $1.869/MMBtu last Wednesday to $1.944/MMBtu yesterday. The price of the 12-month strip averaging June 2020 through May 2021 futures contracts climbed 2¢/MMBtu to $2.557/MMBtu.
• The net injections to working gas totaled 109 billion cubic feet (Bcf) for the week ending May 1. Working natural gas stocks totaled 2,319 Bcf, which is 52% more than the year-ago level and 21% more than the five-year (2015–19) average for this week.
• The natural gas plant liquids composite price at Mont Belvieu, Texas, rose by 25¢/MMBtu, averaging $3.35/MMBtu for the week ending May 6. The prices of butane and isobutane fell by 3% and 6%, respectively. The price of propane remained flat week over week. High reliance on ethane as petrochemical feedstock resulted in ethane prices rising 20%. Natural gasoline prices rose by 31%.
• According to Baker Hughes, for the week ending Tuesday, April 28, the natural gas rig count decreased by 4 to 81. The number of oil-directed rigs fell by 53 to 325. The total rig count decreased by 57, and it now stands at 408.

more summary data

Prices/Supply/Demand:

Prices increased at major hubs with rupture on major pipeline. This report week (Wednesday, April 29, to Wednesday, May 6), the Henry Hub spot price rose 18¢ from $1.70/MMBtu last Wednesday to $1.88/MMBtu yesterday after reaching a high of $1.93/MMBtu on Tuesday. Prices at key trading hubs generally reached weekly highs on Tuesday following a Monday explosion on the Texas Eastern Transmission (TETCO) pipeline. Temperatures across the Lower 48 states were generally close to normal on average, with much warmer-than-normal temperatures in Texas and across the Southwest. However, the Great Plains and Midwest experienced cooler-than-normal temperatures at the end of the report week, putting upward pressure on prices in those markets. At the Chicago Citygate, the price increased 26¢ from $1.65/MMBtu last Wednesday to $1.91/MMBtu yesterday.

Pipeline rupture in Kentucky restricts movement of natural gas out of Appalachia producing region. On Monday, Enbridge Inc. reported an explosion on a 30-inch pipeline segment of its TETCO system near the Owingsville Compressor Station, 50 miles east of Lexington, Kentucky. The company declared a force majeure, as the Pipeline and Hazardous Materials Safety Administration conducts an investigation.

TETCO sends natural gas from the Appalachian producing region to demand markets on the U.S. Gulf Coast. Before the rupture on Monday afternoon in northeast Kentucky, more than 1.3 billion cubic feet per day (Bcf/d) of natural gas flowed south to Gulf Coast demand markets, according to Genscape. Appalachia production fell immediately following the explosion; however, by Wednesday flows indicated that production had started to recover as natural gas began to be rerouted, according to Natural Gas Intelligence. Flows in this region were already restricted because of an explosion in August 2019.

Northeast prices are down amid seasonal spring temperatures. Prices in the northeast fell as a result of rerouting of natural gas flows on the TETCO pipeline. At the Algonquin Citygate, which serves Boston-area consumers, the price went down 6¢ from $1.66/MMBtu last Wednesday to $1.60/MMBtu yesterday. At the Transcontinental Pipeline Zone 6 trading point for New York City, the price decreased 12¢ from $1.55/MMBtu last Wednesday to $1.43/MMBtu yesterday.

The Tennessee Zone 4 Marcellus spot price decreased 12¢ from $1.38/MMBtu last Wednesday to $1.26/MMBtu yesterday. The price at Dominion South in southwest Pennsylvania fell 10¢ from $1.50/MMBtu last Wednesday to $1.40/MMBtu yesterday because of reductions in flow capacity out of the Appalachia producing region.

California prices rise. The price at PG&E Citygate in Northern California rose 47¢, up from $2.39/MMBtu last Wednesday to $2.86/MMBtu yesterday. The price at SoCal Citygate in Southern California increased 46¢ from $1.86/MMBtu last Wednesday to a high of $2.32/MMBtu yesterday as warmer weather in the region increased power burn because of higher cooling demand.

Permian Basin discount to the Henry Hub is narrowest since August 2017. The price at the Waha Hub in West Texas, which is located near Permian Basin production activities, averaged $1.32/MMBtu last Wednesday, 38¢/MMBtu lower than the Henry Hub price. Yesterday, the price at the Waha Hub averaged a weekly high of $1.77/MMBtu, 11¢/MMBtu lower than the Henry Hub price. Lower production in the Permian Basin and higher demand from warm temperatures in the Southwest narrowed the Permian Basin’s differential to the Henry Hub to the smallest margin since August 2017.

Supply falls. According to data from IHS Markit, the average total supply of natural gas fell by 1.4% compared with the previous report week. Dry natural gas production decreased by 1.3% compared with the previous report week, led by declines in the Appalachia Basin. Average net imports from Canada decreased by 4.6% from last week. See this week’s In the News article for further discussion of declining imports from Western Canada.

Demand falls, driven by decreased demand for heating and cooling in buildings. Total U.S. consumption of natural gas fell by 15.3% compared with the previous report week, according to data from IHS Markit. In the residential and commercial sectors, consumption declined by 38.2% driven by low consumption during the weekend. Natural gas consumed for power generation climbed by 0.5% week over week. Industrial sector consumption decreased by 11.8% week over week. Natural gas exports to Mexico decreased 5.3%.

U.S. LNG exports increase week over week. Fifteen liquefied natural gas (LNG) vessels (six from Sabine Pass, three each from Cameron and Corpus Christi, two from Freeport, and one from Cove Point) with a combined LNG-carrying capacity of 54 Bcf departed the United States between April 30 and May 6, 2020, according to shipping data compiled by Bloomberg. One vessel was loading at the Cove Point terminal on Wednesday.

On May 1, Train 3 at the Freeport LNG facility in Texas began commercial operations. Freeport’s Train 3 adds 0.66 Bcf/d to total U.S. export capacity. Trains 1 and 2 began commercial operations in December 2019 and January 2020, respectively. Train 4 has received approval from the Federal Energy Regulatory Commission, but it has not yet begun construction.

Storage:

The net injections into storage totaled 109 Bcf for the week ending May 1, compared with the five-year (2015–19) average net injections of 74 Bcf and last year's net injections of 96 Bcf during the same week. Working natural gas stocks totaled 2,319 Bcf, which is 395 Bcf more than the five-year average and 796 Bcf more than last year at this time.

According to The Desk survey of natural gas analysts, estimates of the weekly net change to working natural gas stocks ranged from net injections of 90 Bcf to 112 Bcf, with a median estimate of 106 Bcf. This week had the first weekly net injection higher than 100 Bcf since the week ending October 11, 2019.

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 Analysis Reports
• Short-Term Energy Outlook