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Natural Gas Weekly Update July 12, 2012

In the News:

Prices Increase in Northeast due to Heat, Imports and LNG Help Meet Demand.

The heat wave affecting the northeast United States eased over the past few days, reducing demand from electric power generators for natural gas to meet air conditioning needs. Pipeline constraints in the Northeast often create price spikes during very cold or very hot weather; on June 21, the price at the Algonquin Citygate (which serves Boston consumers) rose to $8.87 per million British thermal units (MMBtu), compared to $2.60 per MMBtu at the Henry Hub the same day. Since then, a few more notable price increases have occurred, although in the past few days Northeast prices have moved closer in line with the Henry Hub price.

Imports from Canada and LNG sendout served as marginal sources of supply to the Northeast during the high temperatures this week. Sendout from stored LNG at the Everett terminal near Boston rose from about zero to 0.15 and 0.18 billion cubic feet (Bcf) on Sunday and Monday, respectively, and Northeast imports from Canada increased from the previous week.

Overview:

(For the Week Ending Wednesday, July 11, 2012)

  • Natural gas price movements at spot markets have been mixed since last Tuesday, July 3. Over the past week, the Henry Hub price has posted a net loss of 6 cents per MMBtu, falling from $2.78 per MMBtu on July 3 to $2.72 per MMBtu yesterday. High temperatures in much of the United States pushed prices up temporarily earlier this week.
  • The August 2012 NYMEX futures price fell from $2.899 per MMBtu July 3 to $2.853 per MMBtu yesterday. Futures prices for the near month have remained below $3 per MMBtu.
  • Working natural gas in storage rose last week to 3,135 Bcf as of Friday, July 6, according to the U.S. Energy Information Administration’s (EIA) Weekly Natural Gas Storage Report (WNGSR). An implied storage build of 33 Bcf for the week positioned storage volumes 548 Bcf above year-ago levels.
  • The natural gas rotary rig count, as reported by Baker Hughes Incorporated, rose by 8 to 542 active rigs as of July 6, 2012. Meanwhile, oil-directed rigs fell by 2 to 1,419 units.

more summary data

Prices:

Natural gas spot prices continue to trade at relatively low levels, although hot weather led to temporary gains this week. On Friday, July 6, heading into a hot weekend, the Henry Hub price rose to $2.94 per MMBtu, its highest level since January of this year. Since Friday, the Henry Hub price has fallen back to $2.72 per MMBtu. Prices at most trading locations around the country rose on Thursday and Friday, with particularly large increases in New England. Prices at the Algonquin Citygate and the Dracut trading point, both serving Massachusetts, rose above $4 per MMBtu on Friday.

Supplies from most sources increased this week. Almost all Gulf of Mexico production that was shut in at the end of June due to Hurricane Debby has returned to service. Imports to the United States from Canada, particularly to the Northeast, rose this week according to data provided by BENTEK Energy LLC (Bentek), to meet marginal demand for natural gas for power generation. Overall demand for natural gas for power generation fell from the previous week, with declines occurring in the back end of the week as temperatures moderated. Total consumption during the week fell by about 1 percent, though it remains 11.5 percent more than year-ago levels. Total supply this week rose by 1.1 percent.

While the Pacific Northwest has been experiencing a very strong year for hydroelectric power, heat in the region led to increased use of natural gas for power generation this week. Power burn in the Pacific Northwest this week, although it represents a very small amount of total power burn in the United States, rose more than 150 percent. Canadian natural gas prices traded at the AECO pricing point in Alberta have traded at a large discount to Rockies and other U.S. prices. This has likely provided Pacific Northwest power producers with an economic marginal source of supply during this week’s warm weather.

The July NYMEX price expired on June 27 at $2.774 per MMBtu, having gained 35.6 cents per MMBtu during its tenure as the near-month contract. Since the August contract has moved into the near-month position, it has gained about 5.5 cents per MMBtu. The 12-month strip (the average of the 12 contracts between August 2012 and July 2013) is currently at $3.311 per MMBtu. Contracts through October remain below $3 per MMBtu.

more price data

Storage

Working natural gas in storage increased to 3,135 Bcf as of Friday, July 6, according to EIA’s WNGSR. This represents an implied net injection of 33 Bcf from the previous week. This week’s injection was 57 Bcf below the 5-year (2007-2011) injection of 90 Bcf, and 54 Bcf below last year’s injection of 87 Bcf. Since April 13, injections of working natural gas into underground storage have fallen short of both year-ago levels and the 5-year average, although stocks remain well above historical levels. Inventories are currently 548 Bcf greater than last year at this time and 516 Bcf greater than the 5-year average.

Two of the three storage regions posted increases this week. Inventories in the East and West regions increased by 20 Bcf over the week (with the 5-year average net injection of 59 Bcf) and 13 Bcf (with the 5-year average net injection of 10 Bcf), respectively, while the Producing region posted no change in working gas stocks (with the 5-year average net injection of 20 Bcf). In the Producing Region, working natural gas inventories decreased 7 Bcf in salt cavern facilities and increased 8 Bcf in nonsalt cavern facilities. (The sum of the Producing region components may not equal the total for the Producing Region, because of independent rounding.)

Temperatures during the storage report week were 5.1 degrees warmer than the 30-year normal temperature and 2.6 degrees warmer than the same period last year. Temperatures in the lower 48 States averaged 79.1 degrees, compared to 76.6 last year and the 30-year normal of 74. While overall temperatures were a few degrees warmer than normal, temperatures varied somewhat across Census Divisions. The East North Central and West North Central Census divisions in the Midwest were particularly warm, averaging 9.1 and 8.6 degrees, respectively, warmer than the 30-year normal. Temperatures in the Pacific Census division were cool averaging 0.3 degrees cooler than the 30-year normal.

more storage data

See also:

Natural Gas Prices at Key Market Locations,
January - July 2012

Dollars per MMBtu

Source: Natural Gas Intelligence





U.S. Natural Gas Supply - Gas Week: (7/4/12 - 7/11/12)
 
Percent change for week compared with:
 
last year
last week
Gross Production
4.58%
1.03%
Dry Production
4.60%
1.03%
Canadian Imports
3.70%
0.87%
      West (Net)
6.93%
-0.53%
      MidWest (Net)
1.22%
1.06%
      Northeast (Net)
2.04%
4.19%
LNG Imports
-12.58%
17.80%
Total Supply
4.42%
1.09%
Source: BENTEK Energy LLC


Weekly natural gas rig count and spot Henry Hub

active rigs$ per MMBtu

Source: Baker Hughes



Working natural gas in underground storage5-year (2007-2011) maximumWorking Gas in Storage5-year (2007-2011) minimumJan '11Jul '11Jan '12Jul '121,0002,0003,0004,000billion cubic feetSource: Form EIA-912, "Weekly Underground Natural Gas Storage Report"


Temperature -- Heating & Cooling Degree Days (week ending Jul 05)
 
HDD deviation from:
 
CDD deviation from:
Region
HDD Current
normal
last year
CDD Current
normal
last year
New England
0
-2
-1
62
31
22
Middle Atlantic
0
-1
-1
94
47
40
E N Central
0
-1
0
112
63
41
W N Central
0
-4
0
119
56
33
South Atlantic
0
0
0
124
33
23
E S Central
0
0
0
136
49
40
W S Central
0
0
0
135
18
-9
Mountain
0
-10
0
90
19
5
Pacific
4
-2
1
32
-4
-25
United States
1
-2
0
100
34
18
Note: HDD = heating degree-day; CDD = cooling degree-day

Source: National Oceanic and Atmospheric Administration

Monthly dry shale gas production

billion cubic feet per day

Source: Lippman Consulting, Inc. Gross withdrawal estimates are as of May 2012 and converted to dry production estimates with EIA-calculated average.

 

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