Natural Gas

‹ See latest Natural Gas Weekly Update

Natural Gas Weekly Update

for week ending May 25, 2016  |  Release Date:  May 26, 2016  |  Next Release: June 2, 2016

Previous Issues

Week:  (View Archive)


JUMP TO: In The News | Overview | Prices/Demand/Supply | Storage

In the News:

More U.S. vessels powered by liquefied natural gas launched

Two weeks ago, the United States company Harvey Gulf International Marine delivered its third offshore supply vessel fueled by liquefied natural gas (LNG). It was also Harvey Gulf's third such vessel supplied to Shell Offshore Inc.

Shell chartered the ship, the Harvey Liberty (pictured), to supply its deep-water exploration and production activities in the Gulf of Mexico with diesel fuel, methanol, and other supplies. These three U.S.-flagged ships and North America's first LNG marine fueling terminal—which Harvey Gulf opened in January 2016 at Port Fourchon, Louisiana—are part of a larger plan by Harvey Gulf to grow its LNG-fueled fleet. The company is currently constructing three additional LNG-fueled vessels, each with a 78,000 gallons LNG fuel tank, enough for up to 15 days of operations.

Recent announcements in the U.S. and globally of orders for, or completions of, LNG-fueled vessels suggest growing interest in LNG as a maritime fuel. There are several reasons for this; for example, LNG prices remain below petroleum-product prices in energy-equivalent terms, despite the rapid fall in crude oil prices since the second half of 2014. Furthermore, because of tightening U.S. and international maritime emissions standards, shipping fleet operators may, shipping fleet operators may adopt relatively cleaner-burning LNG as a fuel instead of distillate. This is especially true for vessels that frequent regions—including most of the U.S. and Canadian coastline—designated as Emission Control Areas by the International Maritime Organization.

Currently there are fewer than 10 ocean-capable, U.S.-flagged LNG-fueled ships, but at least 8 are set to be launched over the next 3 years.

The fleet includes ships from General Dynamics NASSCO, in San Diego. General Dynamics previously built two primarily LNG-powered containerships for TOTE Maritime, and is under contract to convert two of TOTE's diesel-powered vessels to run on LNG. Additionally, there are several ships designed to be LNG-conversion-ready. LNG-ready vessels, which in the near-term will run on distillate, are certified for ready conversion to LNG power. This option allows companies to put off investing in potentially expensive onboard LNG storage capacity until fueling infrastructure is more widely available in the United States.

Among plans for LNG-ready ships are:

  • General Dynamics's five-ship building campaign for American Petroleum Tankers (APT), with all five vessels designed to be LNG-conversion-ready.
  • Philly Shipyard Inc.'s completion of three of four LNG-ready tankers for Crowley Maritime Corp.
  • Philly Shipyard's four new tankers for APT that include designs "with consideration for the use of LNG for propulsion in the future."

Overview:

(For the Week Ending Wednesday, May 25, 2016)

  • Natural gas spot prices fell at most locations outside of the northeastern United States this report week (Wednesday, May 18, to Wednesday, May 25). The Henry Hub spot price fell by 14¢, from $1.91 per million British thermal unit (MMBtu) last Wednesday to $1.77/MMBtu yesterday.
  • At the New York Mercantile Exchange (Nymex), the June 2016 contract price fell slightly from $2.001/MMBtu last Wednesday to $1.992/MMBtu yesterday.
  • Net injections to working gas totaled 71 billion cubic feet (Bcf) for the week ending May 20. Working gas stocks are 2,825 Bcf, which is 37% above the year-ago level and the five-year (2011-15) average for this week.
  • According to Baker Hughes data, for the week ending May 20, the natural gas rig count decreased by 2 to 85 and oil-directed rigs remained flat at 318. The total rig count now stands at 404.
  • The natural gas plant liquids composite price at Mont Belvieu, Texas, rose by 8.5% to $5.49/MMBtu for the week ending Friday, May 20. The prices of all of the fuels making up the composite price increased. Ethane rose by 3.5%, natural gasoline rose by 8.4%, butane rose by 8.8%, isobutane rose by 9.3%, and propane rose by 10.6%.

more summary data

Prices/Supply/Demand:

Henry Hub spot price falls. The Henry Hub spot price fell by 14¢, from $1.91/MMBtu last Wednesday to $1.77/MMBtu yesterday. Most other market locations saw similar movements. At the Chicago Citygate, prices fell from $1.83/MMBtu to $1.77/MMBtu Wednesday to Wednesday. At the PG&E Citygate in California, the spot price fell $1.94/MMBtu to $1.82/MMBtu over the report week.

Northeast prices rise with warmer weather. At the Algonquin Citygate, which serves Boston-area consumers, prices rose from $1.75/MMBtu last Wednesday to $2.01/MMBtu yesterday. At Transcontinental Pipeline's Zone 6 trading point for New York, prices rose from $1.40/MMBtu last Wednesday to $1.62 yesterday.

Marcellus prices rise slightly. Marcellus-area prices increased over the week. The Tennessee Zone 4 Marcellus price rose from $1.32/MMBtu last Wednesday to $1.38/MMBtu yesterday. The price at Dominion South in northwest Pennsylvania rose by 12¢, ending the week at $1.48/MMBtu.

Nymex near-month prices down. At the New York Mercantile Exchange (Nymex), the June 2016 contract price declined by less than a penny, from $2.001/MMBtu last Wednesday to $1.992/MMBtu yesterday. On the other hand, the 12-month strip, which averages the June 2016 through May 2017 Nymex contracts, rose from $2.535/MMBtu to $2.641/MMBtu over the report week. While the near-month contract price declined, all other prices in the 12-month strip rose during the report week.

Supply flat. According to data from PointLogic, average total supply for the report period remained flat this week. Dry production was flat, averaging 74 billion cubic feet per day (Bcf/d) for the week, while net imports from Canada declined 1% and accounted for 6 Bcf/d of supply.

Consumption falls. Average consumption for the period declined by 4%, according to data from PointLogic. This decline was driven by a decrease in residential/commercial consumption, which fell 23% week on week, likely the result of warmer weather. Power burn rose 6% week over week, exports to Mexico remained flat at 3.5 Bcf/d, and industrial consumption fell by 2%.

U.S. LNG exports fall. Natural gas pipeline receipts to the Sabine Pass liquefaction terminal averaged 0.56 Bcf/d, 5% lower than receipts last week. One vessel arrived at the terminal on May 24 to load the 10th cargo since the terminal's commissioning in February. The terminal's operator, Cheniere Energy, announced in the filing with the Federal Energy Regulatory Commission that it plans to begin exporting liquefied natural gas from the second train in August.

more price data

Storage:

Working gas stocks continue to climb. Working gas in the Lower 48 states posted its sixth straight week of net injections. Net injections into storage totaled 71 Bcf during the storage report week, compared with the five-year (2011-15) average of 97 Bcf and last year's net injection of 106 Bcf during the same week. As a result, the surplus in storage compared with the five-year average declined from the previous week to 769 Bcf, and the surplus compared with year-ago levels decreased to 756 Bcf.

The 2016 refill season remains well behind the pace of recent injection seasons. Cumulative net injections into working gas total 345 Bcf thus far in the 2016 refill season, compared with the five-year average of 450 Bcf and last year's tally of 597 Bcf during the same period. Despite the slow start to the refill season, working gas stocks remain near record-highs for this time of year. Working gas stocks as of last Friday were 61 Bcf above the previous five-year (2011-15) maximum, which occurred in 2012, of 2,764 Bcf for this time of year. This surplus over the 2012 refill season record decreased for the first time since April 22. Cumulative net injections totaled 290 Bcf at this point in the 2012 refill season.

January futures price continues to trade at more than $1 above current spot price. Decisions about whether to inject gas into storage during the refill season are often made with an eye toward the upcoming January, because it is typically the coldest winter month. During the most recent storage week, the average natural gas spot price at the Henry Hub was $1.91/MMBtu, while the Nymex futures price of natural gas for delivery in January 2017 averaged $2.99/MMBtu, a difference of $1.08/MMBtu. A year ago, the premium was 44¢/MMBtu, suggesting there is more financial incentive this year to buy and store natural gas in the summer for sale in the winter. The average Henry Hub price so far in the injection season this year, from April 1 to May 20, was $1.92/MMBtu, 28% lower than the average value of $2.68/MMBtu for the same period last year.

Stock change is close to analyst expectations. Expected net injections for the week generally ranged from 60 to 76 Bcf, with a median of 67 Bcf. At the release of EIA's Weekly Natural Gas Storage Report, the price for the natural gas futures contract on the Nymex for July delivery at the Henry Hub fell about 1¢/MMBtu to $2.16/MMBtu, with 347 trades executed at the release.

Temperatures are below seasonal norms in most of the Lower 48 states. Temperatures in the Lower 48 states averaged 59°F during the storage report week, 5% below normal and 7% below last year at this time. Only the Mountain and Pacific U.S. Census Divisions reported temperatures that were above normal.

more storage data

See also:

LNG-powered vessel, the Harvey Liberty, manufactured by Harvey Gulf International, LLC


Natural gas spot prices
Spot Prices ($/MMBtu)
Thu,
19-May
Fri,
20-May
Mon,
23-May
Tue,
24-May
Wed,
25-May
Henry Hub
1.82
1.81
1.95
1.91
1.77
New York
1.35
1.31
1.51
1.66
1.62
Chicago
1.76
1.76
1.90
1.87
1.77
Cal. Comp. Avg.*
1.73
1.67
1.88
1.84
1.72
Futures ($/MMBtu)
June contract
2.039
2.062
2.055
1.980
1.992
July contract
2.195
2.207
2.199
2.146
2.181
*Avg. of NGI's reported prices for: Malin, PG&E Citygate, and Southern California Border Avg.
Source: NGI's Daily Gas Price Index
Natural gas futures prices
Natural gas liquids spot prices


U.S. natural gas supply - Gas week: (5/19/16 - 5/25/16)
Average daily values (Bcf/d):
 
last year
last week
this week
Marketed production
81.5
81.7
81.4
Dry production
73.4
73.8
73.5
Net Canada imports
5.9
5.9
5.9
LNG pipeline deliveries
0.2
0.2
0.2
Total supply
79.5
79.9
79.6

Source: OPIS PointLogic Energy, an IHS Company
Note: LNG pipeline deliveries represent gas sendout from LNG import terminals.

U.S. natural gas consumption - Gas week: (5/19/16 - 5/25/16)
Average daily values (Bcf/d):
 
last year
last week
this week
U.S. consumption
55.4
59.9
57.7
    Power
22.5
25.0
26.4
    Industrial
19.9
20.3
19.9
    Residential/commercial
13.0
14.7
11.3
Mexico exports
2.8
3.5
3.5
Pipeline fuel use
1.9
2.0
2.0
LNG pipeline receipts
-
0.6
0.6
Total demand
60.1
66.1
63.7

Source: OPIS PointLogic Energy, an IHS Company
Note: LNG pipeline receipts represent pipeline deliveries to LNG export terminals.

Natural gas supply


Weekly natural gas rig count and average Henry Hub
Rigs
Fri, May 20, 2016
Change from
 
last week
last year
Oil rigs
318
0.00%
-51.75%
Natural gas rigs
85
-2.30%
-61.71%
Miscellaneous
1
0.00%
-75.00%
Rig numbers by type
Fri, May 20, 2016
Change from
 
last week
last year
Vertical
48
-9.43%
-58.97%
Horizontal
314
-0.32%
-54.03%
Directional
42
10.53%
-50.59%
Source: Baker Hughes Inc.


Working gas in underground storage
Stocks
billion cubic feet (bcf)
Region
2016-05-20
2016-05-13
change
East
511
490
21
Midwest
629
606
23
Mountain
171
166
5
Pacific
298
293
5
South Central
1,216
1,199
17
Total
2,825
2,754
71
Source: U.S. Energy Information Administration
Working gas in underground storage
Historical comparisons
Year ago
(5/20/15)
5-year average
(2011-2015)
Region
Stocks (Bcf)
% change
Stocks (Bcf)
% change
East
395
29.4
433
18.0
Midwest
387
62.5
435
44.6
Mountain
128
33.6
121
41.3
Pacific
304
-2.0
252
18.3
South Central
856
42.1
814
49.4
Total
2,069
36.5
2,056
37.4
Source: U.S. Energy Information Administration


Temperature -- heating & cooling degree days (week ending May 19)
 
HDD deviation from:
 
CDD deviation from:
Region
HDD Current
normal
last year
CDD Current
normal
last year
New England
61
2
17
0
-1
-2
Middle Atlantic
67
20
42
0
-5
-13
E N Central
90
37
42
0
-11
-15
W N Central
90
44
27
0
-14
-10
South Atlantic
35
16
29
42
2
-26
E S Central
37
20
33
19
-11
-34
W S Central
12
9
11
40
-17
-32
Mountain
59
-1
-19
23
3
16
Pacific
14
-24
-40
4
-3
4
United States
55
15
16
16
-5
-14
Note: HDD = heating degree-day; CDD = cooling degree-day

Source: National Oceanic and Atmospheric Administration

Average temperature (°F)

7-Day Mean ending May 19, 2016

Mean Temperature (F) 7-Day Mean ending May 19, 2016

Source: NOAA/National Weather Service

Deviation between average and normal (°F)

7-Day Mean ending May 19, 2016

Mean Temperature Anomaly (F) 7-Day Mean ending May 19, 2016

Source: NOAA/National Weather Service