Natural Gas

Overview:

(For the Week Ending Wednesday, January 16, 2013)

• Natural gas prices were up across the board for the report week (Wednesday to Wednesday). The Henry Hub closed at $3.43 per million British thermal unit (MMBtu) yesterday, up 29 cents for the week. Trading points in the Northeast saw the most substantial price jumps.
• The January 2013 New York Mercantile Exchange (Nymex) contract increased by 32 cents, from $3.113 per MMBtu last Wednesday to close at $3.435 per MMBtu yesterday. The near-month Nymex price ended the week just one half cent per MMBtu above the Henry Hub price.
• Working natural gas in storage declined last week to 3,168 billion cubic feet (Bcf) as of Friday, January 11, according to the U.S. Energy Information Administration's (EIA) Weekly Natural Gas Storage Report (WNGSR). An implied storage withdrawal of 148 Bcf for the week moved storage levels 147 Bcf below year-ago levels, and 316 Bcf above the 5-year average.
• The Baker Hughes Incorporated natural gas rotary rig count fell by 5 units, from 439 to 434 as of Friday, January 11. The average oil rig count increased by 5 units, from 1,318 to 1,323. This is the first increase in the oil rig count since falling sharply through late December.

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Prices:

Natural gas prices are up at most market locations, increasing most significantly in the Northeast. Henry Hub increased from $3.14 per MMBtu last Wednesday to $3.43 yesterday, an increase of 29 cents per MMBtu, or 9 percent. Most trading points increased between 20 and 30 cents per MMBtu week-on-week, with the notable exception of the Northeast. Algonquin Citygate, serving Boston, jumped by $4.57 per MMBtu, an increase of 104 percent over prices at the start of the report period. Transco Zone 6 NY, serving New York City, saw a price increase of $2.59 per MMbtu, up 78 percent Wednesday to Wednesday. Temperatures in the Northeast fell precipitously Tuesday and yesterday, which were the days of the largest price increases. The Midcontinent and Northwest faced low temperatures across the whole report period.

The Nymex futures price rose week-on-week. The Nymex price rose 32 cents per MMBtu over the report period, from $3.113 per MMBtu last Wednesday to $3.435 per MMBtu yesterday. The near-month Nymex price closed just one half cent per MMBtu above the Henry Hub price yesterday. The 12-Month Strip (average of February 2013 to January 2014 contracts) also increased, rising 25 cents per MMBtu over the report period and ending the week at $3.654 per MMBtu. The 24-Month Strip is also trading below $4.00 per MMBtu, closing at $3.864 yesterday.

Total consumption for the report week was down. According to Bentek estimates, overall natural gas consumption for the nation fell by 2.2 percent. The residential/commercial sector, the biggest gas-consuming sector during the winter, consumed 5.4 percent less gas week-on-week. Industrial consumption was also down, falling by 1.6 percent. The decline in total natural gas consumption was partially mitigated by a 3.9 percent increase in natural gas consumed in the electric power sector. The Midcontinent, Southwest, and Pacific Northwest all faced colder temperatures week-on-week, and consumed 42.8 percent, 23.4 percent, and 44.8 percent more gas for electric generation, respectively. These regions are not large consumers of natural gas as a source for electricity, so these large percentages partially result from small base volumes. The Midcontinent and Pacific Northwest regions are not particularly reliant on natural gas as a source for electricity, so these percentages are relative to small bases. The Southeast, the biggest gas-consuming region for electric power, was unseasonably warm over the report week, and consumed 7.3 percent less gas for electric generation.

Total supply for the report week was down. Bentek estimates an overall supply decrease of 1.5 percent for the report period. U.S. gross and dry natural gas production were down 0.7 percent week-on-week and Canadian imports were down 9.3 percent. Imports fell most sharply in the Northeast, dropping by 34.4 percent. LNG imports, which are just a tiny fraction of overall supply, were also down by 8.8 percent.

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Storage

Working natural gas in storage decreased to 3,168 Bcf as of Friday, January 11, according to EIA's WNGSR. This represents an implied net withdrawal of 148 Bcf from the previous week. This week's net withdrawal was 4 Bcf larger than the 5-year average net withdrawal of 144 Bcf, and 59 Bcf larger than last year's average net withdrawal of 89 Bcf. Inventories are currently 147 Bcf (4.4 percent) less than last year at this time and 316 Bcf (11.1 percent) greater than the 5-year average.

All three storage regions posted declines this week. Inventories in the East, West, and Producing regions decreased by 86 Bcf (the 5-year average net withdrawal is 85 Bcf), 23 Bcf (the 5-year average net withdrawal is 20 Bcf), and 39 Bcf (the 5-year average net withdrawal is 39 Bcf), respectively. In the Producing region, working natural gas inventories decreased 8 Bcf (2.8 percent) in salt cavern facilities and decreased 33 Bcf (3.7 percent) in nonsalt cavern facilities.

Temperatures during the storage report week were 4.0 degrees warmer than the 30-year normal temperature and 4.4 degrees cooler than the same period last year. Temperatures in the Lower 48 states averaged 37.1 degrees, compared to 41.6 degrees last year and the 30-year normal of 33.1 degrees. While overall temperatures were a few degrees warmer than normal, temperatures varied somewhat across Census divisions. In the Midwest, the West North Central and East North Central Census divisions were particularly warm, averaging 8.7 and 7.0 degrees warmer, respectively, than the 30-year normal. In the West, the Pacific and Mountain Census divisions were relatively cool, averaging 1.1 and 0.9 degrees cooler, respectively, than the 30-year normal. Heating degree-days nationwide were 12.4 percent below normal and 19.4 percent above last year.

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See also:

• Natural Gas Analysis Reports
• Short-Term Energy Outlook