Natural Gas

Overview:

(For the Week Ending Wednesday, July 18, 2018)

• Natural gas spot price movements were mixed this report week (Wednesday, July 11 to Wednesday, July 18). The Henry Hub spot price fell from $2.84 per million British thermal units (MMBtu) last Wednesday to $2.72/MMBtu yesterday.
• At the New York Mercantile Exchange (Nymex), the August 2018 contract price fell 11¢ from $2.829/MMBtu last Wednesday to $2.721/MMBtu yesterday.
• Net injections to working gas totaled 46 billion cubic feet (Bcf) for the week ending July 13. Working natural gas stocks are 2,249 Bcf, which is 24% lower than the year-ago level and 19% lower than the five-year (2013–17) average for this week.
• The natural gas plant liquids composite price at Mont Belvieu, Texas, fell by 51¢, averaging $8.64/MMBtu for the week ending July 18. The price of natural gasoline, ethane, propane, butane, and isobutane all fell, by 4%, 5%, 6%, 5%, and 8%, respectively.
• According to Baker Hughes, for the week ending Tuesday, July 10, the natural gas rig count increased by 2 to 189. The number of oil-directed rigs remained constant at 863. The total rig count increased by 2, and it now stands at 1,054.

more summary data

Prices/Supply/Demand:

National benchmark spot price decreases. This report week (Wednesday, July 11 to Wednesday, July 18), the Henry Hub spot price fell 12¢ from $2.84/MMBtu last Wednesday to $2.72/MMBtu yesterday. Outside of the Rocky Mountain region, temperatures were generally higher than normal in much of the country, but they didn’t have a significant effect on prices. Trade reports indicated that higher production levels may be placing downward pressure on prices, offsetting price pressure from higher power-burn (consumption of natural gas for power generation) and unusually low levels of natural gas in storage.

Similar to the Henry Hub, prices at the Chicago Citygate decreased 9¢ from $2.75/MMBtu last Wednesday to $2.66/MMBtu yesterday.

SoCal Citygate price rises sharply as a result of supply constraints and hot weather. The price at SoCal Citygate increased $4.47 from $4.60/MMBtu last Wednesday to $9.07/MMBtu yesterday, driven by high temperatures and ongoing delivery constraints in the region. This price increase resulted in a year-to-date record-high daily price for SoCal Citygate.

In parts of Southern California, temperatures averaged nearly 90°F for the week, increasing demand for air conditioning and, as a result, electric power sector consumption of natural gas in the region. Infrastructure bringing natural gas into Southern California is experiencing ongoing maintenance that is limiting flows by more than 500 million cubic feet per day (MMcf/d). In addition, temperatures are expected to remain high throughout the weekend, and the National Oceanic and Atmospheric Administration’s 6-10 Day Outlook indicates that California is expected to have above-normal temperatures throughout the next week.

Prices at PG&E Citygate in Northern California rose 3¢, up from $2.93/MMBtu last Wednesday to $2.96/MMBtu yesterday.

Northeast prices are flat or down. At the Algonquin Citygate, which serves Boston-area consumers, prices went up 1¢ from $2.70/MMBtu last Wednesday to $2.71/MMBtu yesterday. At the Transcontinental Pipeline Zone 6 trading point for New York City, prices decreased 9¢ from $2.92/MMBtu last Wednesday to $2.83/MMBtu yesterday. Temperatures in the Northeast were generally hotter this week, but prices did not closely follow weather trends.

Appalachian prices rise. In contrast to price points in the Northeast, prices in the Appalachian basin increased this report week. Tennessee Zone 4 Marcellus spot prices increased 16¢ from $2.09/MMBtu last Wednesday to $2.25/MMBtu yesterday. Prices at Dominion South in southwest Pennsylvania rose 20¢ from $2.17/MMBtu last Wednesday to $2.37/MMBtu yesterday. However, regional prices are still trading at a significant discount relative to the Henry Hub and other prices in the nation.

Nymex futures decrease. At the Nymex, the price of the August 2018 contract decreased 11¢, from $2.829/MMBtu last Wednesday to $2.721/MMBtu yesterday. The price of the 12-month strip averaging August 2018 through July 2019 futures contracts declined 9¢ to $2.733/MMBtu.

Overall supply remains largely unchanged. 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 decreased by 1% compared with the previous report week. Average net imports from Canada increased by 2% from last week.

Overall demand increases on higher power burn . Total U.S. consumption of natural gas rose by 4% compared with the previous report week, according to data from PointLogic Energy. Natural gas consumed for power generation climbed by 9% week over week. Industrial sector consumption decreased by 1% week over week. In the residential and commercial sectors, consumption declined by 6%. Natural gas exports to Mexico decreased 3%.

U.S. LNG exports increase week over week. Six LNG vessels, combined LNG-carrying capacity 21.7 billion cubic feet per (Bcf), departed the United States from July 12 through July 18 (all from the Sabine Pass liquefaction terminal).

Kinder Morgan Inc., the developer of Elba Island liquefaction facility in Georgia, which is currently under construction, has announced a delay in commissioning the facility until the fourth quarter of this year, according to Bloomberg. Originally, the commissioning process was expected to begin in the third quarter. Kinder Morgan attributed the delay to construction issues and issues with assembling units at the site. Elba Island is one of six liquefaction projects either currently operating or under construction in the United States. The facility has a nameplate capacity of 0.33 Bcf/d and would consist of 10 modular liquefaction units called trains, each with a capacity of 0.033 Bcf/d. The facility will be commissioned in two phases. The first phase will involve commissioning six of the modular liquefaction trains.

A full list of U.S. liquefaction facilities is available in EIA’s database of liquefaction facilities.

Storage:

Net injections fall lower than the five-year average for the third week in a row. Net injections into storage totaled 46 Bcf for the week ending July 13, compared with the five-year (2013–17) average net injections of 62 Bcf and last year's net injections of 31 Bcf during the same week. Working gas stocks totaled 2,249 Bcf, which is 535 Bcf lower than the five-year average and 710 Bcf lower than last year at this time.

Working gas stocks are on pace to end the refill season lower than the five-year range. Net injections into storage are 17% lower than the five-year average rate so far in the 2018 refill season. If working gas stocks match the five-year average rate of injections of 9.4 Bcf/d for the remainder of the refill season, inventories will total 3,280 Bcf on October 31, compared with the five-year low of 3,560 Bcf for that time of year. In the Lower 48 states, total working gas stocks are currently 95 Bcf higher than the bottom of the five-year range, but 9 Bcf and 36 Bcf lower than the five-year range in the East and Midwest regions, respectively. The South Central region posted working gas stocks 129 Bcf higher than the bottom of the five-year range.

Despite relatively low storage inventories, the average January 2019 futures contract price traded at a lower premium to the average spot price than last year at this time. Price differences between the spot price and the futures prices at the Nymex indicate limited economic incentives for net injections into working gas. During the most recent storage week, the average natural gas spot price at the Henry Hub averaged $2.85/MMBtu while the Nymex futures price of natural gas for delivery in January 2019 averaged $3.04/MMBtu, 20¢/MMBtu higher than the spot price. A year ago, the January contract was 34¢/MMBtu higher than the Henry Hub spot price.

Reported net injections into storage are on the low end of the range of analysts’ expections. According to The Bloomberg survey of natural gas analysts, estimates of the weekly net change from working natural gas storage ranged from net injections of 44 Bcf to 65 Bcf, with a median estimate of 56 Bcf. At the 10:30 a.m. release of the Weekly Natural Gas Storage Report (WNGSR), the price of the Nymex futures contract for August delivery at the Henry Hub increased 3¢/MMBtu to $2.75/MMBtu, with 1,351 trades executed. Prices increased somewhat in subsequent trading but remained close to $2.75/MMBtu.

Temperatures are in the higher-than-normal range for the storage week. Temperatures in the Lower 48 states averaged 76 degrees Fahrenheit (°F), 1°F higher than normal and 1°F lower than last year at this time. Temperatures were also 3°F lower than the level reported for the previous week.

more storage data

See also:

• Natural Gas Analysis Reports
• Short-Term Energy Outlook