At the NYMEX, the price of the August 2011 contract decreased 9.8 cents (2.3 percent) over the week, from $4.315 per MMBtu last Wednesday to $4.217 per MMBtu yesterday. The contract fluctuated throughout the week but saw a significant decrease at the end of the week, dropping 14.6 cents (3.3 percent) between Tuesday and Wednesday, likely as a result of a cold front moving south from Canada that has begun driving temperatures downward in portions of the Northeast and Midwest. Nearly all pricing points experienced a decline on Wednesday.
The Henry Hub price decreased 6 cents per MMBtu (1.4 percent) during the week to close at $4.34 per MMBtu yesterday. As with the August 2011 NYMEX contract, the price displayed considerable fluctuation over the week.
End-market natural gas prices mirrored wholesale prices and generally declined over the week. An exception was the New York citygate price which increased 3 cents over the week, closing at $4.80 per MMBtu. The Chicago citygate price dropped 10 cents, closing at $4.37 per MMBtu.
Demand fluctuated considerably during the week. According to estimates from BENTEK Energy Services, LLC, consumption fell 5.5 percent between Thursday, June 30 and Sunday, July 3, only to spike upwards 9.2 percent between Sunday and Tuesday before dropping back, ending the week 4.7 percent over last week. The largest gain on an absolute basis was registered by the power sector, which increased 12.3 percent over last week and 13.1 percent over this week last year. A strong uptick in demand in the power sector was seen Tuesday and was likely due to high temperatures, especially in the Northeast. A decrease in consumption in the industrial sector made up for some of the increased consumption elsewhere.
Supply remained essentially level over the week and posted a modest 1.2 percent increase over last week. According to Bentek Energy estimates, U.S. production increased only 0.4 percent over last week. There were notable differences, however, in other supply sources between this week and last week, with Canadian imports increasing 12.4 percent and LNG imports declining by 29.5 percent. Net Canadian imports increased across the board, with the most significant increase in the Northeast where Canadian imports exceeded last week’s level by 29 percent. Conversely, LNG imports fell 29.5 percent, continuing the decline experienced last week and ending on July 1 at the year’s lowest level of 400 million cubic feet (MMcf) per day. The largest decline, 340 MMcf per day, was at Golden Pass, with Everett experiencing the second largest decline of 130 MMcf per day. Domestic weekly gas production averaged slightly less than 64.7 Bcf per day. Production held above 64 Bcf per day throughout the week and exceeded 65 Bcf per day on Monday and Tuesday before falling back on Wednesday. Domestic production now stands 7.2 percent above this time last year. Canadian imports are 9.8 percent below year-ago volumes and LNG imports are 47.4 percent below.
Working natural gas in storage rose to 2,527 Bcf as of Friday, July 1, according to EIA’s WNGSR (see Storage Figure). The net build of 95 Bcf was higher than the 5-year average build for the week of 80 Bcf and last year’s build of 73 Bcf. Stocks are now 224 Bcf below last year’s level and 48 Bcf below the 5-year average.
Stocks last week grew at an above average pace in each of the three storage regions. While storage levels in the East and West regions remain well below the 5-year average levels, the gap has been narrowing for the past 3 weeks in the East and the past 4 weeks in the West. Meanwhile, the Producing Region, which has seen mostly larger than average builds in 2011, is 107 Bcf above the 5-year average.
Temperatures in the lower 48 States during the week ending June 30 were slightly cooler than normal and cooler than last year. The National Weather Service’s degree-day data show that the temperature in the lower 48 States last week averaged 73.1 degrees, 0.1 degrees cooler than normal, and 2.4 degrees cooler than last year (see Temperature Maps and Data) Temperature Maps and Data). All regional temperatures were fairly close to normal levels with the West South Central showing the most deviation at 4.0 degrees warmer than normal. Cooling degree-days were almost equal to normal but about 21 percent below last year.
Other Market Trends
Argentina Makes Long-Term LNG Deal With Qatar. Qatar has agreed to a long-term commitment to supply 700 MMcf per day of LNG to Argentina, according to reports by BENTEK Energy. For Argentina, which only began importing LNG two years ago and has relied on spot supplies, this is their first long-term contract. According to BENTEK Energy, the deal is advantageous for Qatar, which has been trying to find markets for new LNG production. Qatar is the world’s largest LNG exporter, exporting close to 1.8 trillion cubic feet (Tcf) in 2009, the most recent year for which data are available and reported in an EIA Country Analysis Brief. At that time, countries in Asia (Japan, India, and South Korea), and countries in Western Europe (United Kingdom, Spain, and Belgium) made up the vast majority of consumers of Qatari LNG.
New York State Proposes Fracking Guidelines. The New York Department of Environmental Conservation (DEC) released new proposed rules for hydraulic fracturing or hydrofracking, which was effectively banned under an executive order by former governor David Paterson. According to the DEC, if adopted, the rules would open up about 85 percent of Marcellus Shale land in the State of New York for potential production. The rules propose allowing hydrofracking on private lands in the State, excluding watersheds around New York City and Syracuse. Surface drilling would be prohibited on state-owned lands, including parks, forests, and wildlife areas. Additionally, the DEC proposed regulations to protect drinking water, prevent gas migration, and control spills. The proposed regulations are stricter than 2009 draft recommendations, which, among other things, would have allowed hydrofracking in the New York City and Syracuse watersheds. The DEC noted that the regulations would be under a comment period for 60 days beginning in August. More information is available at: http://www.dec.ny.gov/press/75403.html.