Natural Gas

Overview:

(For the week ending Wednesday, February 9, 2022)

• Natural gas spot prices fell at most locations this report week (Wednesday, February 2 to Wednesday, February 9). The Henry Hub spot price fell from $6.44 per million British thermal units (MMBtu) last Wednesday to $4.06/MMBtu yesterday.
• International natural gas prices fell this report week. Bloomberg Finance, L.P. reports that swap prices for liquefied natural gas (LNG) cargos in East Asia for the balance of February fell nearly $2.00 from $26.29/MMBtu last week to a weekly average of $24.29/MMBtu. At the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas spot market in Europe, the day-ahead prices fell $1.70 to a weekly average of $25.94/MMBtu. The price at TTF is now almost half of what it was in the fourth week of December, when it averaged $51.18/MMBtu. In the same week last year (week ending February 10, 2021), prices in East Asia and at TTF were $8.36/MMBtu and $6.79/MMBtu, respectively.
• The price of the March 2022 NYMEX contract decreased $1.492, from $5.501/MMBtu last Wednesday to $4.009/MMBtu yesterday. The price of the 12-month strip averaging March 2022 through February 2023 futures contracts declined $1.019 to $4.174/MMBtu.
• The net withdrawals from working gas totaled 222 billion cubic feet (Bcf) for the week ending February 4. Working natural gas stocks totaled 2,101 Bcf, which is 17% lower than the year-ago level and 9% lower than the five-year (2017–2021) average for this week.
• The natural gas plant liquids (NGPLs) composite price at Mont Belvieu, Texas, fell by 54 cents/MMBtu, averaging $11.16/MMBtu for the week ending February 9. The Brent crude oil price rose 4% on average this report week, outpacing the rise in the natural gasoline price, which rose 2%. Prices of all other NGPLs fell this report week, after recording significant price gains last week. Ethane prices fell 9%, in line with an 8% decrease in the natural gas price reported at the Houston Ship Channel. The ethane premium to natural gas narrowed by about 16 cents/MMBtu, or 11%, for the week ending February 9. The propane price fell 3% this report week, after rising by 9% last week. The normal butane and isobutane prices, which rose by 11% last week, fell 9% this report week.
• According to Baker Hughes, for the week ending Tuesday, February 1, the natural gas rig count increased by 1 to 116 rigs. The Eagle Ford and the Utica each gained one rig, and one rig was dropped in an unspecified region for a net gain of one rig. The number of oil-directed rigs increased by 2 to 497 rigs. The Williston Basin in North Dakota and Montana gained four rigs; the Permian and the Granite Wash, both in Texas, each gained one rig, offsetting losses elsewhere for a net gain of two rigs. The total rig count now stands at 613, the highest level since April 3, 2020, and 221 rigs more than last year at this time.

more summary data

Prices/Supply/Demand:

Prices along the Gulf Coast fall as effects of the cold front across Texas dissipate. This report week (Wednesday, February 2 to Wednesday, February 9), the Henry Hub spot price fell $2.38 from $6.44 per million British thermal unit (MMBtu) last Wednesday to $4.06/MMBtu yesterday. Most of the price decline occurred on Monday, when the price fell almost $1.00/MMBtu, in response to production declines in Texas that were reported to be lower than initially expected. The production decline was also well below the 10.0 Bcf/d decrease in production reported in February 2021 after a mid-month storm caused production shut-ins across much of the region. Prices continued to fall over the rest of the report week as temperatures rose and production returned (see the Permian section for more detail). IHS Markit reports feed gas deliveries to LNG terminals in South Louisiana increased by 289 million cubic feet per day (MMcf/d) this report week to 7.0 Bcf/d. Feed gas deliveries to Venture Global’s Calcasieu Pass LNG export terminal rose this report week. TransCameron Pipeline, which moves natural gas to Calcasieu Pass, reports that flows to the terminal were close to 250 MMcf/d on February 5, a record high, and have remained close to 200 MMcf/d since then. LNG has been steadily produced at the terminal since early January. Federal Offshore Gulf of Mexico production remained almost unchanged this report week.

Prices in the Midwest decrease in line with the Henry Hub price. At the Chicago Citygate, the price decreased $2.54 from $6.33/MMBtu last Wednesday to $3.79/MMBtu yesterday, in line with the Henry Hub spot price. IHS Markit reports Midwest residential and commercial sector consumption was up 422 MMcf/d (3%) this report week as temperatures in the Chicago area averaged 23°F, almost 3°F below normal.

Prices fall in the West as temperatures rise. The price at PG&E Citygate in Northern California fell $2.15, down from $6.59/MMBtu last Wednesday to $4.44/MMBtu yesterday. The price at SoCal Citygate in Southern California decreased $4.86 from $8.78/MMBtu last Wednesday to $3.92/MMBtu yesterday. NOAA reports temperatures along the Pacific coast were above normal over the last report week. In San Francisco, California, the average temperature was more than 2°F higher than normal, and San Franciso had 15 fewer heating degree days (HDD) than normal. In Los Angeles, California, the average temperature was almost 3°F higher than normal. IHS Markit estimates weekly average residential and commercial consumption of natural gas in California decreased by almost 500 MMcf/d (15%) this report week. The price at Sumas on the Canada-Washington border, the main pricing point for natural gas in the Pacific Northwest, fell $2.03 from $5.63/MMBtu last Wednesday to $3.60/MMBtu yesterday. IHS Markit estimates natural gas consumption in the residential and commercial sector in the Pacific Northwest decreased by nearly 300 MMcf/d (18%).

Prices in the Northeast decline week over week after rising earlier in the report week. At the Algonquin Citygate, which serves Boston-area consumers, the price went down $6.53 from $14.86/MMBtu last Wednesday to $8.33/MMBtu yesterday. At the Transcontinental Pipeline (Transco) Zone 6 trading point for New York City, the price decreased $2.75 from $6.79/MMBtu last Wednesday to $4.04/MMBtu yesterday. Ahead of last weekend, at the beginning of this report week, the price in both regions rose significantly in advance of colder-than-normal temperatures returning to the region and lower natural gas supplies. The Algonquin Citygate price reached a weekly high of $22.81/MMBtu on February 3, and Transco Zone 6 reached a weekly high of $13.50/MMBtu on February 4. Temperatures warmed during the week and more regasified LNG was delivered into New England, easing natural gas supply constraints, and decreasing the use of oil-fired electricity generation, which has fallen to less than 3% of the electricity supply mix this week.

The Exemplar, an LNG carrier capable of regasifying LNG for delivery into the natural gas pipeline system, also known as a floating storage and regasification unit (FSRU), continued discharging at the Northeast Gateway LNG Terminal this week. Deliveries from the terminal averaged close to 80 MMcf/d, according to Enbridge, operator of the Algonquin Gas Transmission natural gas pipeline. To date, the FSRU has delivered approximately 2.0 Bcf of LNG into the New England market and an estimated 1.0 Bcf remains onboard in the ship’s LNG storage tanks.

Prices in the Appalachia production region fall in line with declining prices in other regions across the country. The Tennessee Zone 4 Marcellus spot price decreased $2.01 from $5.73/MMBtu last Wednesday to $3.72/MMBtu yesterday. The price at Eastern Gas South in southwest Pennsylvania fell $2.10 from $5.75/MMBtu last Wednesday to $3.65/MMBtu yesterday. According to IHS Markit, natural gas production fell 0.7 Bcf/d (2%) from 32.9 Bcf/d a week ago. Total demand decreased 2.2 Bcf/d (5%) to 40.7 Bcf/d, and net flows out of the region were down by 0.5 Bcf/d (2%) week over week to 26.1 Bcf/d.

Prices in the Permian Basin production region fall as the latest cold snap is short-lived. The price at the Waha Hub in West Texas, which is located near Permian Basin production activities, fell $3.78 this report week, from $7.26/MMBtu last Wednesday to $3.48/MMBtu yesterday. The Waha Hub traded 58 cents below the Henry Hub price yesterday, compared with last Wednesday when it traded 82 cents above the Henry Hub price. Natural gas production in the Permian Basin averaged 13.5 Bcf/d this week, down 1.2 Bcf/d (8%) week over week. At the beginning of this report week, according to IHS Markit, production was down more than 3 Bcf/d early in the report week as a result of colder-than-normal temperatures and freeze-offs in the producing area. HDDs in Midland-Odessa totaled 39 for February 2 and 3, compared with a normal of 17 for those two days. The El Paso Natural Gas Company (EPNG) issued an operational alert on February 3 because of concerns the linepack (volume of natural gas in the pipeline) fell as a result of decreased receipts from the Permian Basin into its system. EPNG’s ability to respond to system imbalances continues to be impaired as a result of an outage on L2000 that has been in place since mid-August 2021, when a segment of the line ruptured near Coolidge, Arizona. On February 4, EPNG cancelled its warning of operational challenges and in a February 7 update, the company stated that line pack no longer posed an operational challenge. According to IHS Markit, by the end of the weekend, production in the Permian Basin returned to the levels at which they were averaging before the colder-than-normal temperatures arrived.

U.S. total natural gas supply falls this report week as a result of decreased dry natural gas production. The average total supply of natural gas fell by 2.7% (2.8 Bcf/d) compared with the previous report week, according to data from IHS Markit. Dry natural gas production decreased by 3.6% (3.4 Bcf/d), while average net imports from Canada increased by 9.1% (0.6 Bcf/d) week over week.

U.S. total consumption of natural gas falls this week as a result of decreased consumption in most sectors. Total U.S. consumption of natural gas fell by 1.6% (1.6 Bcf/d) compared with the previous report week, according to data from IHS Markit. Natural gas consumed for power generation, one of two areas that recorded higher demand this week, increased 1.5% (0.4 Bcf/d) from the previous report week. In the residential and commercial sectors, consumption declined by 3.7% (1.8 Bcf/d) as temperatures moderated slightly across the United States this week compared with the previous week, according to NOAA. Industrial sector consumption decreased by 0.9% (0.2 Bcf/d) week over week, and natural gas exports to Mexico decreased 8.7% (0.5 Bcf/d) over the same time period. Natural gas deliveries to LNG export facilities (LNG pipeline receipts) averaged 12.4 Bcf/d, or 0.3 Bcf/d higher than last week.

U.S. LNG exports are up by five vessels this week from last week. Twenty-seven LNG vessels (nine from Sabine Pass, five each from Cameron and Corpus Christi, four from Freeport, and two each from Cove Point and Elba Island) with a combined LNG-carrying capacity of 101 Bcf departed the United States between February 3 and February 9, 2022, according to shipping data provided by Bloomberg Finance, L.P.

Storage:

The net withdrawals from storage totaled 222 Bcf for the week ending February 4, compared with the five-year (2017–2021) average net withdrawals of 150 Bcf and last year's net withdrawals of 174 Bcf during the same week. Working natural gas stocks totaled 2,101 Bcf, which is 215 Bcf lower than the five-year average and 441 Bcf lower 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 withdrawals of 202 Bcf to 234 Bcf, with a median estimate of 224 Bcf.

The average rate of withdrawals from storage is 8% higher than the five-year average so far in the withdrawal season (November through March). If the rate of withdrawals from storage matched the five-year average of 11.8 Bcf/d for the remainder of the withdrawal season, the total inventory would be 1,451 Bcf on March 31, which is 215 Bcf lower than the five-year average of 1,666 Bcf for that time of year.

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