Natural Gas

Overview:

(For the Week Ending Wednesday, January 30, 2013)

• Natural gas prices fell across the board this week. Cold weather in the Northeast, which had driven prices in New York and New England above $30 per million British thermal unit (MMBtu) earlier in the report week, relented and prices dropped back to the single digits. The Henry Hub price declined 29 cents per MMBtu during the week to end at $3.24 per MMBtu.
• The March 2013 New York Mercantile Exchange (Nymex) contract moved into the front-month slot and fell from $3.554 per MMBtu last Wednesday to $3.335 per MMBtu yesterday. The February contract expired on January 29 at $3.226 per MMBtu.
• Working natural gas in storage declined to 2,802 Bcf as of Friday, January 25, according to the U.S. Energy Information Administration's (EIA) Weekly Natural Gas Storage Report (WNGSR). An implied storage withdrawal of 194 Bcf for the week moved storage levels 202 Bcf below year-ago levels, and 304 Bcf above the 5-year average.
• The natural gas rotary rig count rose by 5 to 434 last Friday, according to data reported by Baker Hughes Incorporated. The oil-directed rig count fell by 1 to 1,315 active rigs.

more summary data

Prices:

Temperatures in the Northeast were in the single digits, but prices were in the 30s. Brutally cold weather helped drive Northeastern prices up at the beginning of the report week. The Northeast United States is somewhat infrastructure constrained and the tight supply-demand balance during extreme cold or heat often leads to price spikes. On Wednesday, January 23, prices at Transcontinental Pipeline's Zone 6 delivery point, which serves New York City, rose to $35.33 per MMBtu, followed by $37.07 per MMBtu the following day. Prices at the Algonquin Citygate, which serves Boston, also had two days of very high prices, $31.32 per MMBtu on Wednesday, January 23, and $34.59 per MMBtu the next day.

High demand caused Transcontinental Pipeline to issue a system-wide operational flow order on January 24 to correct imbalances. The OFO was lifted the next day. Pipeline imports from Canada helped fill the need for more natural gas. Imports on Wednesday, January 24 and 25 were about 1.7 Bcf/d, almost twice the level at the end of the week when the weather warmed up. Prices began falling Friday, and Northeast prices hit their low for the week on Tuesday (Boston at $4.60 per MMBtu, New York at $3.47 per MMBtu), but expectations of a return of cold weather by the weekend likely contributed to price increases the next day. Even with continued mild temperatures on Wednesday, New York ended the week at $3.99 per MMBtu, while Boston ended at $7.42 per MMBtu.

Henry Hub prices fell during the week from $3.53 per MMBtu last Wednesday to $3.24 per MMBtu yesterday. The price hit its weekly low on Tuesday, January 29 at $3.14 per MMBtu, but rose again slightly at the end of the week. Most pricing points around the country followed a similar pattern as temperatures thawed across most of the lower 48 States.

During the report week supply remained flat and demand fell. Despite the cold weather in the beginning of the week east of the Mississippi, and high heating demand the first few days of the report week, residential and commercial consumption averaged out at 11.6 percent below last week, according to estimates from Bentek. Consumption of natural gas for electric power and industrial consumption also fell by 13.7 percent and 3.0 percent, respectively. Canadian imports fell 9.9 percent and LNG sendout remained at minimal levels. Production rose 1 percent week over week, but was 0.3 percent lower than the same time last year.

At the Nymex, the March 2013 contract moved into the front-month slot and ended the week at $3.335 per MMBtu. This was a decline of 21.9 cents. The February contract expired on January 29 at $3.226 per MMBtu, having lost 24.3 cents during its tenure as the near-month contract. Contracts across the board displayed a similar pattern. The 12-month strip (the average of all contracts between March 2013 and February 2014) also declined, ending the week at $3.653 per MMBtu

more price data

Storage

Working natural gas in storage decreased to 2,802 Bcf as of Friday, January 25, according to EIA's WNGSR. This represents an implied net withdrawal of 194 Bcf from the previous week. This week's net withdrawal was 16 Bcf larger than the 5-year average net withdrawal of 178 Bcf, and 45 Bcf larger than last year's average net withdrawal of 149 Bcf. Inventories are currently 202 Bcf (6.7 percent) less than last year at this time and 304 Bcf (12.2 percent) greater than the 5-year average of 2,498 Bcf.

All three storage regions posted declines this week. Inventories in the East, West, and Producing regions decreased by 129 Bcf (the 5-year average net withdrawal is 113 Bcf), 18 Bcf (the 5-year average net withdrawal is 20 Bcf), and 47 Bcf (the 5-year average net withdrawal is 46 Bcf), respectively. In the Producing region, working natural gas inventories decreased 16 Bcf (6.2 percent) in salt cavern facilities and decreased 31 Bcf (3.9 percent) in nonsalt cavern facilities.

Temperatures during the storage report week were 0.1 degree cooler than the 30-year normal temperature and 2.7 degrees cooler than the same period last year. Temperatures in the Lower 48 states averaged 33.0 degrees, compared to 35.7 degrees last year and the 30-year normal of 33.1 degrees. While overall temperatures were close to normal, temperatures varied somewhat across Census divisions. The East North Central Census division in the Midwest and the Middle Atlantic Census division in the Northeast were relatively cool, averaging 3.6 and 2.9 degrees cooler, respectively, than the 30-year normal. The West South Central division in the South and the Pacific Census division in the West were relatively warm, averaging 4.7 and 3.9 degrees warmer, respectively, than the 30-year normal. Heating degree-days nationwide were normal and 8.7 percent above last year.

more storage data

See also:

• Natural Gas Analysis Reports
• Short-Term Energy Outlook