In most trading locations, natural gas spot prices stayed flat, with some locations posting modest increases for the week. The Henry Hub price remained flat for the report week, moving from $4.79/MMBtu last Wednesday to $4.78 yesterday. Across the country, many trading points continue to trade at a discount to the Henry Hub price. Even Algonquin Citygate, which delivers gas to Boston, was settling at a discount to Henry Hub until this past Monday.
Prices for delivery in California were up about a nickel, possibly due to the cooler weather in the Pacific Northwest relative to last week, as well as the explosion at Williams's Opal gas processing plant last Wednesday, detailed below. The Malin spot price, which delivers at the southern Oregon border, rose from $4.67 last Wednesday to $4.73 yesterday. The SoCal Citygate price in California also rose a few cents over that period, from $5.01 to $5.08.
Nymex modestly increases.
The May near-month contract began the week at $4.730/MMBtu last Wednesday and settled at $4.795 on Monday, when the June contract moved to near-month position. The June contract gained about 7 cents over the report week, from $4.747 last Wednesday to $4.815 yesterday. The 12-month strip (the average of the June 2014 through May 2015 contracts) increased by a similar increment, rising from $4.799 last Wednesday to $4.882 yesterday. The small spread between the near-month price and the 12-month strip indicates that markets do not anticipate significant natural gas price increases over the next year.
Spread between June and January futures contracts is 21 cents.
The highest winter month Nymex price in trading yesterday was January, which settled at $4.976/MMBtu. This is 21 cents more than the Nymex June contract price yesterday.
Ethane spot price remains low despite new developments.
The Mont Belvieu ethane spot price is currently very low relative to the natural gas price. So far in 2014, it has averaged $0.61/MMBtu below the Henry Hub price. Consequentially, many natural gas processors continue to leave some amount of ethane in their dry gas stream and sell it as natural gas, a phenomenon referred to as ethane rejection. The price gap between Mont Belvieu ethane and Henry Hub natural gas has increased since 2013, when ethane averaged $0.19/MMBtu below Henry Hub for the year. This is in contrast to prices that occurred as recently as 2011, when the annual average ethane spot price was $10.47/MMBtu, which was $6.47/MMBtu above the Henry Hub price.
As a result of this attractively priced ethane, many chemical companies are rushing to build steam crackers that consume ethane to produce various other hydrocarbon products. Additionally, ethane exports to Canada via the Mariner West Pipeline have begun, averaging 24,000 barrels per day (Mbbl/d) in February. Other key ethane export projects include Mariner East and Marcus Hook in the Marcellus region, supporting shipments out of New Jersey, the Vantage Pipeline from North Dakota to Canada, and the recently announced Enterprise project in the Gulf Coast.