Natural Gas Weekly Update Nov. 14, 2013
Natural Gas Weekly Update
for week ending November 13, 2013 | Release Date: November 14, 2013 | Next Release: November 21, 2013
Gas pipeline expansions reduce Marcellus backup, New York gas prices
As reported in October, natural gas pipeline expansions were slated to add nearly 1 billion cubic feet per day (Bcf/d) of capacity to flow gas to markets in New York and New Jersey on November 1. These expansions happened on schedule, increasing access for consumers in the New York City metropolitan area to natural gas produced in the Appalachian Basin's Marcellus Shale play. This has resulted in lower gas prices for New York consumers, and has eased supply backup in the Marcellus Basin.
For the first 13 days of this month, prices have declined year-on-year at the Transco Zone 6 – New York (TZ6-NY) trading point by 40 cents per million British thermal units (MMBtu) compared to the national benchmark Henry Hub spot price in Erath, Louisiana. So far this month, November’s flows are 14% above flows for the same days in 2012. Although November demand has been slightly higher in 2013 than 2012, increased supply capacity has contributed to lower prices, which have declined from $3.75/MMBtu for the first 13 days of November 2012 – a 33 cent/MMBtu premium to the Henry Hub spot price – to $3.47/MMBtu for the first 13 days of November 2013 – a 7 cent/MMBtu discount to Henry Hub.
The New York price decline contrasts with the experience in central Pennsylvania, where prices have risen this month. Since June, gas purchased at the Leidy interchange hub on Williams’s Transcontinental Gas Pipeline (Transco) has traded at a significant discount to the Henry Hub spot price, with increased Marcellus production pushing the supply of gas available above the Leidy Line's capacity to move it to markets. However, new Marcellus takeaway capacity from the November expansions has eased this supply backlog, narrowing Leidy’s discount to Henry Hub by 88 cents/MMBtu through the first 13 days of November compared to its average discount in September and October, from $1.45/MMBtu to 58 cents/MMBtu.
The largest increase in flows to the New York market area occurred on Kinder Morgan’s Tennessee Gas Pipeline (TGP), following the completion of its Northeast Upgrade Project. This project added 0.62 Bcf/d of pipeline capacity from northern Pennsylvania to New Jersey. Spectra Energy pipelines can carry this additional gas from TGP facilities into New York City as part of its New York-New Jersey Expansion project. Deliveries on TGP to New York averaged 1.32 Bcf/d through November 13, versus an average of 0.72 Bcf/d for the first 13 days of November 2012.
Based on a comparison to year-ago levels, the increased flows on TGP for the first 13 days in November displaced flows into the New York market on the Algonquin Gas Transmission (AGT) pipeline and Iroquois Pipeline, which flow gas south from Canadian and northern markets, as well as the Texas Eastern Transmission Company (TETCO) pipeline, which flows gas to New York from southern Pennsylvania and the Southeast and Gulf regions. While deliveries to New York from TGP have been fairly consistent this month, deliveries from these other pipelines, as well as Transco, have fluctuated in accordance with changes in demand, and rose on November 12 and 13, when cold weather pushed total New York area flows above 5.0 Bcf/d.
On November 1, Transco began full service on its Northeast Supply Link project, which provides 0.24 Bcf/d of additional capacity from Leidy to the 210 Market Pool Line in New Jersey and delivery points in New York. Increased Transco deliveries into New York from Leidy were partially offset by decreased flows on its pipelines from the southeastern and Gulf regions, according to Bentek Energy.
(For the Week Ending Wednesday, November 13, 2013)
- Natural gas prices rose across most of the country over the report week (Wednesday to Wednesday). The Henry Hub spot price closed yesterday at $3.68/MMBtu, up 23 cents from $3.45/MMBtu at the beginning of the report week.
- At the New York Mercantile Exchange (Nymex), the December contract settled at $3.566/MMBtu yesterday, up 6.8 cents/MMBtu for the report period.
- Working natural gas in storage increased to 3,834 Bcf as of Friday, November 8, according to the U.S. Energy Information Administration’s (EIA)
- Weekly Natural Gas Storage Report (WNGSR). A net storage injection of 20 Bcf for the week resulted in storage levels 2.0% below year-ago levels but 1.5% above the 5-year average.
- The Baker Hughes natural gas rotary rig count totaled 365 active units as of Friday, November 8, an increase of 5 rigs from the previous week. The oil rig count increased by 7 units over last week to 1,383. The total rig count is 1,754, up 12 rigs for the week and down 52 from a year ago.
- The weekly average natural gas plant liquids composite price fell this week (covering November 4 through November 8) compared to the previous week by 1.5%, and is now at $10.48/MMBtu. Ethane fell by 5.3%, while natural gasoline, butane, and isobutane fell between 1% and 3%. Propane increased by 0.7%.
Natural gas hub prices rose throughout the country. Prices at most locations increased by between 10 and 30 cents/MMBtu from Wednesday-to-Wednesday. The price increase was stronger in the Northeast, with the onset of cooler than normal weather at the end of the report week. The spot price at the Algonquin Citygate, which serves the Boston area, rose by $4.41/MMBtu in trading on Monday, and closed Tuesday $5.15 above last Wednesday’s closing price. However, prices at Algonquin fell in trading this Wednesday to close the report week at $4.78/MMBtu, up $1.15 from last Wednesday. The spot price at Transco Zone 6 New York, delivering to New York City, closed trading Tuesday up 81cents/MMBtu, more in line with the average for other nearby pricing points. It also fell in trading this Wednesday to close the report week at $3.77/MMBtu, up 48 cents from the beginning of the report week. In previous years, price changes in reaction to changes in weather and increased demand, at both Transco Zone 6 New York and at the Algonquin Citygate, have been larger than the average for other Northeast pricing points. However, consumers served by the Transco Zone 6 New York trading hub have recently benefitted from a number of pipeline expansions that began service in the region on Friday, November 1, as discussed in this week’s “In the News” section of this report.
Prices at the Henry Hub increased after three weeks of declines. The Henry Hub spot price, which started the report week at $3.45/MMBtu, averaged 9-cent gains in trading every day this report week except for Friday and Wednesday, when it posted 3-cent and 1-cent losses, respectively. The Henry Hub price ended the report week at $3.68/MMBtu, up 23 cents from the previous Wednesday. Similarly, at the Nymex, the December natural gas contract increased 6.8 cents/MMBtu from $3.498/MMBtu last Wednesday to $3.566/MMBtu yesterday. The 12-month strip (average of December 2013 to November 2014 contracts) gained 4.5 cents/MMBtu for the week, closing at $3.665/MMBtu.
Residential/commercial sector demand increased. Total consumption increased by 15.6% from the previous week, largely because of a 31.5% increase in residential and commercial consumption, according to data from Bentek Energy. Space heating demand increased as temperatures fell across much of the country and significantly colder-than-normal temperatures moved into the Northeast on Tuesday. Consumption of natural gas for power generation and in the industrial sector were also up this week, by 6.1% and 4.7% respectively.
Natural gas supply increased as production and imports rose. Total supply increased by 1.6% from the previous week. Dry gas production increased by 0.7%, with production reaching an all time high of 67.5 Bcf on November 9, according to Bentek data. Net imports of natural gas from Canada increased by 14.1% as net imports into the Northeast were almost double the previous week. Imports of LNG increased over the report week, notably at the Everett terminal in Massachusetts, but continue to be a small contributor to total U.S. natural gas supply.
Working natural gas in storage rose to 3,834 Bcf as of November 8. This week’s net injection was 20 Bcf compared with last year’s withdrawal of 12 Bcf, and slightly larger than the 5-year average increase of 19 Bcf. Current inventories are 80 Bcf (2.0%) less than last year at this time, but 58 Bcf (1.5%) above the 5-year (2008-12) average of 3,776 Bcf.
The net injection was in line with the market expectation of a 20-Bcf build. The increase in prices on the Nymex upon release of the storage numbers was moderate. At 10:30 a.m., the price of the near month (December 2013) contract rose 4 cents to $3.54/MMBtu, and fell back down minutes later to $3.51.
Two of the three regions posted larger-than-average builds. Net injections in the East region were 10 Bcf this week, 5 Bcf larger than its
5-year average injection of 5 Bcf, and stocks remain 4.5% below the
5-year average for that region. Inventories in the Producing region grew by 12 Bcf this week, 1 Bcf larger than its 5-year average injection of 11 Bcf, and stocks in that region are 9.5% over its 5-year average levels. The West region had a net withdrawal of 2 Bcf, compared with its 5-year injection of 3 Bcf.
Near normal temperatures supported this week’s close-to-average net injection. Temperatures in the Lower 48 states averaged 51.0 degrees for the week, 1.1 degrees warmer than the 30-year normal temperature and 2.1 degrees warmer than the same period last year.