Prices decline with mild weather and ample supply. Natural gas prices decreased in all market locations last week, led by mild temperatures across most of the country. The Henry Hub spot price began the week at $2.82/MMBtu and settled yesterday at $2.64/MMBtu. Prices at all locations across the United States declined, with the largest declines in the Northeast. Prices at PG&E citygate declined from $3.19/MMBtu last Wednesday to $2.98/MMBtu yesterday. Prices at the Chicago Citygate decreased by 7% Wednesday-to-Wednesday, closing yesterday at $2.58/MMBtu.
Northeast prices reach historic lows. In the Northeast, prices on Wednesday settled at historically low levels. Prices at the Algonquin Citygate, which serves Boston, started the report week at $2.50/MMBtu, declined by 90¢ by Friday and lost almost half of its value ($1.20) by the end of the report week, settling at $1.30/MMBtu yesterday. This is the all-time lowest price at this trading location since the start of the price series in 1999. Similarly, at Transcontinental Pipeline's Zone 6 trading point for New York City delivery, the spot price started the report week at $2.86/MMBtu, and then declined by 42% ($1.19) to settle at $1.67/MMBtu yesterday. This is slightly higher than its record low of $1.37/MMBtu on October 10, 2014.
Strong production growth in the Northeast, combined with constrained pipeline takeaway capacity and relatively low demand for this time of year have put considerable pressure on natural gas prices in the region. With more than 7.7 gigawatts (GW) of coal capacity scheduled for retirements in the PJM region in 2015, according to SNL Financial, a large share of which will retire in June, the natural gas demand from power generation may pick up some of the lost share of coal generation. Additionally, new pipelines coming online in the Northeast in the next few months will help alleviate existing capacity constraints and move Marcellus gas to other regions.
Marcellus prices decline. Marcellus-area prices steadily declined in all trading locations through the week by 37¢-41¢. At Tennessee’s Zone 4 Marcellus location, prices decreased from $1.35/MMBtu last week to 98¢/MMBtu yesterday. At Dominion South, which serves customers in portions of Pennsylvania, Ohio, Maryland, West Virginia, and Virginia, prices decreased by 24%, from $1.55/MMBtu to $1.18/MMBtu. On the Transco Leidy Line, prices declined by 41¢, from $1.48/MMBtu last week to $1.07/MMBtu yesterday.
Nymex prices decline. At the New York Mercantile Exchange (Nymex), the June contract expired Wednesday, May 27, at $2.815/MMBtu. The July contract moved into the front-month position on Thursday and declined over the week from $2.706/MMBtu last Thursday to $2.634/MMBtu yesterday. The 12-month strip (the average of the 12 contracts between July 2015 and June 2016) declined from $3.026/MMBtu last Wednesday to $2.899/MMBtu yesterday.
Natural gas liquids prices decline sharply. The natural gas plant liquids composite price at Mont Belvieu declined sharply, led by the decline in price of propane, which decreased by $1.07/MMBtu (22%) to $3.89/MMBtu, the lowest level since EIA began producing the series in 2009. Sharp decline in propane prices may be affected by high storage levels, capacity constraints at storage facilities in the Gulf of Mexico, and low demand for liquefied petroleum gas exports.
Production declines amid continued maintenance. Dry gas production declined this week by 0.8% and averaged 71.9 Bcf/d, according to Bentek Energy data, but was still 5.3% higher than last year’s levels. Decreased production was attributed primarily to shut-ins at several processing plants and pipeline maintenance. Industry reports indicate the production was not directly affected by intense storms and flooding in Texas, the Gulf Coast, and Midcontinent. Production in the Northeast declined by 0.3 Bcf/d, affected by reduced deliveries at processing plants and maintenance outages. Production also declined in Texas because of outages for maintenance on Tennessee Gas Pipeline and on several Transco receipt points from processing plants along the Gulf Coast. Imports of natural gas from Canada declined by 1.2%, led by the decline in imports to the Midwest, in part because of continued unplanned maintenance on Alliance Pipeline in western Canada. LNG sendout increased slightly, but remains minimal. Overall, supply declined by 0.9% week over week.
Demand increases in power generation. U.S. gas consumption increased by 2.2% this week, with the largest increase in the power sector, which more than offset declines in residential/commercial sectors. Consumption of natural gas for power generation (power burn) increased by 10.2% and averaged 24.1 Bcf/d week over week. The largest increase in power burn was in the Southwest, where demand increased 43% by 1.1 Bcf/d, followed by increases of 0.6 Bcf/d in Texas and 0.4 Bcf/d in the Northeast. Residential and commercial consumption declined 6.7% week over week, while industrial consumption was flat. Exports to Mexico declined by 0.4% from last week, but were still 22% higher than last year’s level.