Increasing natural gas production in the Appalachian Basin's Marcellus Shale play continues to outpace the growth in the region's pipeline takeaway capacity. This has led to supply backups in the Marcellus region, with new production often unable to flow to areas where gas is in high demand, placing downward pressure on prices in the region. It has also contributed to a number of natural gas wells in Marcellus remaining backlogged, with a February 28 report from Barclay's estimating that more that 1,300 wells there are drilled but not completed. Natural gas prices at Leidy Hub in central Pennsylvania have continued to trade significantly below the Henry Hub national benchmark spot price. This winter, the Leidy spot price averaged $3.55 per million British thermal units (MMBtu), $1.08/MMBtu below Henry Hub, and lower than the average spot price at any other major U.S. natural gas hub.
Consumption falls. U.S. natural gas consumption fell in all sectors except in the industrial sector, which increased by 0.1% from the previous week. Overall U.S. consumption decreased by 2.2 billion cubic feet per day (Bcf/d) or 3.5% from the previous week, with a combined decrease of 2.1 Bcf/d, in power, residential, and commercial consumption. Moderate temperatures across the United States likely contributed to the decreases of gas consumption. Power burn decreased in most regions except in the Midcontinent and the Pacific Northwest, where the temperatures were colder. Gas exports to Mexico fell 6.9% from the previous week.
Increased natural gas imports from Canada offset a slight decline in U.S. gas production. According to Bentek data, overall supply increased 0.1% this week. This increase was due to a 5.4% increase in natural gas imports from Canada, particularly into western and northeastern United States, which increased 4.2% and 48.4% this week, respectively. Dry gas production decreased slightly, by 0.2% from the previous week. LNG sendout declined slightly, but has been a minimal part of the supply picture for some time now.
Natural gas spot prices outside the Midwest and Northeast rise. Spot prices outside the Midwest and the Northeast increased by $0.15/MMBtu on average, with the largest gains occurring in Texas and Louisiana. The average spot prices in Texas and Louisiana increased by $0.18/MMBtu and $0.17/MMBtu from last Wednesday to $4.69/MMBtu and $4.71/MMBtu yesterday, respectively. The Henry Hub spot price increased by $0.17/MMBtu from $4.62/MMBtu last Wednesday to $4.79/MMBtu yesterday.