Natural gas outlook: Prices were nearly flat across the week

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In the News: Winter 2012-13 natural gas net imports from eastern Canada half of five-year average

Net imports of natural gas via pipeline from eastern Canada into the northeastern United States this past winter (November 1, 2012 through March 31, 2013) averaged 1.06 billion cubic feet per day (Bcf/d), less than half of the five-year average of 2.14 Bcf/d, according to data from BENTEK Energy, LLC (Bentek). Natural gas net imports from eastern Canada fell below the five-year same-day minimum over 60 percent of the time this winter (97 out of 151 days), according to the Bentek data.

Natural gas imports from eastern Canada into the northeastern United States have been decreasing every year since 2007. This has resulted in part from decreased imports of natural gas along the Maritimes & Northeast pipeline running from Nova Scotia into New Brunswick, Maine, and on into New Hampshire and Massachusetts. Another contributing factor has been the increased amounts of natural gas brought into the Northeast on pipelines with access to shale gas from the Marcellus formation in Pennsylvania and West Virginia.

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Prices:

Natural gas prices were flat at many market locations, but increased significantly at Algonquin Citygate. The Henry Hub price was nearly flat, increasing by 1 cent per MMBtu over the report week to close at $4.25 per MMBtu yesterday. Several trading points currently have a discount of 10 cents per MMBtu or more to the Henry Hub price. Opal in Wyoming and Malin in southern Oregon closed at $4.08 per MMBtu and $4.10 per MMBtu yesterday, respectively. Northeastern prices were somewhat elevated, with Transco Zone 6 NY, serving New York City, increasing by 11 cents per MMBtu over the report week, and closing at $4.49 per MMBtu yesterday. Algonquin Citygate, serving Boston markets, rose more substantially, from $4.65 per MMBtu last Wednesday to $5.16 per MMBtu yesterday, an increase of $0.51 per MMBtu.

The Nymex futures price fell week-on-week. The near-month Nymex price fell by 5 cents per MMBtu over the report period, from $4.214 per MMBtu last Wednesday to $4.166 per MMBtu yesterday. The 12-Month Strip (the average of May 2013 to April 2014 contracts) similarly fell over the report period, ending the week at $4.320 per MMBtu.

Total demand for the report week was down slightly. According to Bentek estimates, overall natural gas consumption in the United States decreased by 1.1 percent. The residential/commercial sector consumed 1.9 percent more gas for the report period. Industrial consumption of natural gas also increased somewhat, up 0.6 percent for the report week. Natural gas consumption for power generation was down on average, falling by 6.1 percent. Most regions consumed less natural gas for electricity generation, with the exception of the Northeast and Southwest, which consumed slightly more. Overall natural gas consumed in the electric power sector is down 23.3 percent relative to last year, partly due to higher natural gas prices, and its relative price to coal which may influence electric power plant dispatch decisions.

Total supply for the report week was up slightly. Bentek estimates that supply was up slightly for the report period. U.S. gross and dry natural gas production rose by 0.8 percent over last week. Production for the week is 2.4 percent above last year’s levels. Canadian imports were essentially flat, increasing by 0.3 percent for the report period: imports in the West are up, imports in the Midwest are down, and imports in the Northeast are near zero. LNG imports, a very small contributor to U.S. supply, decreased by 0.9 percent.

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Storage

Working natural gas in storage increased to 1,734 Bcf as of Friday, April 19, according to EIA's WNGSR. This represents an implied net injection of 30 Bcf from the previous week. The 5-year average and year-ago stock changes for the week were implied net injections of 50 Bcf and 43 Bcf, respectively. Inventories are currently 807 Bcf (31.8 percent) less than last year at this time and 94 Bcf (5.1 percent) below the 5-year average of 1,828 Bcf.

Two of the three storage regions posted increases this week. Inventories in the East and Producing regions increased by 21 Bcf (the 5-year average net injection is 28 Bcf) and 11 Bcf (the 5-year average net injection of 16 Bcf), respectively, while the West region posted a decline of 2 Bcf (compared to the 5-year average net injection of 6 Bcf). In the Producing region, working natural gas inventories increased 8 Bcf (4.5 percent) in salt cavern facilities and increased 2 Bcf (0.4 percent) in nonsalt cavern facilities.

Temperatures during the storage report week were 0.7 degrees warmer than the 30-year normal temperature and 1.6 degrees cooler than the same period last year. Temperatures in the Lower 48 states averaged 53.7 degrees, compared to 55.3 degrees last year and the 30-year normal of 53.0 degrees. While overall temperatures were less than a degree warmer than normal, temperatures varied somewhat across Census divisions. The West North Central Census division in the Midwest and the Mountain Census division in the West were relatively cool, averaging 7.9 and 4.6 degrees cooler, respectively, than the 30-year normal. In the South, the South Atlantic and East South Central Census divisions were relatively warm, averaging 6.9 and 5.0 degrees warmer, respectively, than the 30-year normal. Heating degree-days nationwide were 1.1 percent above normal and 16.7 percent above last year.

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