Spot prices rose at most market locations during the report week (Wednesday to Wednesday), as parts of the country experienced their first taste of winter weather. The Henry Hub spot price rose from $3.56 per million British thermal unit (MMBtu) last Wednesday, October 29, to $3.80/MMBtu yesterday, November 5.

At the New York Mercantile Exchange (Nymex), the December 2014 contract moved into the front-month slot as November expired last Wednesday. The December contract rose over the week, beginning at $3.788/MMBtu last Wednesday and ending at $4.194/MMBtu yesterday.

Working natural gas in storage rose to 3,571 billion cubic feet (Bcf) as of Friday, October 31, according to the U.S. Energy Information Administration (EIA) Weekly Natural Gas Storage Report (WNGSR). A net increase in storage of 91 Bcf for the week resulted in storage levels 6.2% below year-ago levels and 6.8% below the five-year average for this week.

The total U.S. rotary rig count for the week ending October 31 increased by 2 units to 1,929 rigs, according to data from Baker Hughes Inc. The natural gas rig count increased by 14 units to 346, while oil rigs fell by 13 units to 1,582, and 1 rig categorized as miscellaneous was added. The natural gas rig count has now risen for three consecutive weeks, adding a total of 26 rigs since October 10, and this week's 14-rig increase is the largest in more than a year. However, natural gas rigs remain 14 units less than year-ago levels, while oil rigs are 206 units greater than last year's level.

The Mont Belvieu natural gas plant liquids composite price increased by 2.2% to $8.31/MMBtu for the week of October 27 - 31. The price of natural gasoline declined by 0.2%, while the other component prices increased. Ethane, propane, isobutane, and butane increased by 1.7%, 3.1%, 3.4%, and 3.8%, respectively.

 

Prices/Supply/Demand

Prices rise on colder weather. Natural gas prices rose at most market locations this week, as New England and some Southern states experienced early winter weather. The Henry Hub spot price rose 24 cents from $3.56/MMBtu last Wednesday to $3.80/MMBtu yesterday. The Algonquin Citygate, which serves Boston, began the week at $4.03/MMBtu and rose to $6.64/MMBtu on Friday on forecasts for a cold, snowy weekend in New England. The price dropped back to $4.06/MMBtu at the end of the report week as temperatures moderated.

Mid-Atlantic prices rise overall. The Mid-Atlantic region also experienced cold weather, with snow in North Carolina and South Carolina, and prices posted overall gains for the week. Transcontinental Pipeline's Zone 6 trading point for delivery to New York City rose on the week from $2.66/MMBtu last Wednesday to $3.28/MMBtu yesterday. Prices at Transco's Zone 5 trading regions, which serves consumers from South Carolina to Virginia, rose from $3.59/MMBtu last Wednesday to $3.77/MMBtu yesterday.

Working natural gas in storage rose to 3,571 (Bcf) as of Friday, October 31, according to the U.S. Energy Information Administration (EIA) Weekly Natural Gas Storage Report (WNGSR). A net increase in storage of 91 Bcf for the week resulted in storage levels 6.2% below year-ago levels and 6.8% below the five-year average for this week.

New pipelines begin service. New pipeline expansions will add 1.3 bilion cubic feet per day (Bcf/d) of takeaway capacity from the Marcellus and Utica regions in November, according to Bentek. This may result in additional production coming out of the Northeast. One of the projects, Columbia's West Side, began partial service earlier this month, and will allow 0.4 Bcf/d to be transported from western Pennsylvania and West Virginia to the Gulf region. Texas Eastern has about 2 Bcf/d of reversal or bidirectional projects to take Marcellus and Utica gas to market areas through 2017. The 0.3 Bcf/d Texas Eastern Appalachian to Market (TEAM) south expansion came online September 1, two months ahead of its November 1 start date. The 0.6 Bcf/d TEAM 2014, a related project, is expected to be fully operational this month. TEAM South links dry Marcellus gas with the Gulf region; TEAM 2014 links gas from western Pennsylvania and West Virginia with the Northeast, Midwest, and South.

Most Marcellus-area prices this week increased substantially. At Dominion's South trading point prices rose from $2.45/MMBtu last Wednesday to $3.19/MMBtu yesterday. Similarly, prices on Tennessee's Zone 4 Marcellus location rose from $2.15/MMBtu to $2.76/MMBtu.

Marcellus prices remain low. Prices at Marcellus trading points fluctuated during the report week, decreasing by Friday in anticipation of lower weekend demand. Prices rebounded on Monday and ended the report week 3% lower on Tennessee Zone 4 Marcellus and Millennium East Pool, at $2.15/MMBtu and $2.34/MMBtu, respectively.

Supply remains flat, demand increases substantially. Dry production remained flat this week, but is 7.1% greater than the same week last year, according to Bentek Energy data. Imports of natural gas from Canada increased slightly, while LNG sendout remained minimal. On the demand side, residential consumption increased 41.1% from last week, reflecting winter weather and low temperatures in the 20s and 30s through much of the country. Residential and commercial consumption rose to a weekly high of 30.5 Bcf on Saturday, the highest level since April, before dropping back as temperatures moderated in the end half of the report week. Industrial consumption rose 4.9%, and consumption of natural gas for electric power generation dropped 10.2%.

December becomes front-month contract. The November futures contract expired last Wednesday, having gained 42.6 cents during its tenure as the near-month contract. Most of these gains were concentrated in the final week of October. The December contract rose from $3.788/MMBtu last Wednesday to $4.194/MMBtu yesterday. Unsurprisingly, the highest prices of the 12-month strip are for the December 2014 through March 2015 period. The April 2015 contract settled at $3.810/MMBtu yesterday, compared to $4.167/MMBtu for the March 2015 contract.