Friday, February 7, 2020

EIA Natural Gas Weekly Update

From the Energy Information Administration:
In the News:
Natural gas prices fall to lowest level since 2016 and the lowest January price in 20 years
On Friday, January 24, the near-month natural gas Henry Hub futures price at the New York Mercantile Exchange closed at $1.893 per million British thermal units (MMBtu). This price was the lowest January closing price for the near-month contract since January 27, 1999, and the lowest near-month futures price since March 28, 2016, according to NGI data. In addition, the daily spot price at the Henry Hub national benchmark averaged $1.850/MMBtu on January 31, 2020, the second-lowest average price since May 27, 2016. Henry Hub spot prices have averaged between $1.820/MMBtu and $2.835/MMBtu this winter heating season (November 1, 2019– present), and the highest average price was set on November 7, 2019. Warm January weather, leading to reduced withdrawals from underground storage, combined with low nuclear outages and record natural gas production have depressed natural gas prices in future and spot markets.

According to National Oceanic and Atmospheric Administration data, January 2020 was the second-warmest January since 2000, which has limited withdrawals this heating season. Despite starting the 2019–20 heating season at the third-lowest level since 2009, by January 17, 2020, working natural gas storage levels have reached relatively high levels for mid-winter. EIA’s Lower 48 states’ natural gas stocks (storage levels) as of January 31, 2020, reflect a 199 billion cubic foot (Bcf) surplus to the five-year average. If working natural gas stocks follow the five-year average withdrawal rate for the remainder of the heating season, we will end the heating season at almost 2,000 Bcf in storage for the first time since 2017.

In addition to warmer weather, natural gas withdrawals have also been limited as a result of high levels of electric power generation from nuclear power plants. Although nuclear power plant outages tend to be relatively low in January, this January’s outages have been at multi-year lows for the month, moderating the demand for natural gas-fired generation so far this winter.
Natural gas also continues to be produced at near record levels, contributing to lower natural gas prices. Dry natural gas production in January averaged about 95.0 billion cubic feet per day (Bcf/d) according to IHS Markit data. January 2020 had the third-highest monthly production on record, lower than only November and December 2019. On average, dry natural gas production so far this heating season has averaged 95.5 Bcf/d, and if that average is maintained through the end of March, it would be 7.0 Bcf/d higher than last winter, which also set a production record.

Overview:

(For the week ending Wednesday, February 5, 2019)

  • Natural gas spot prices fell at most locations this report week (Wednesday, January 29, to Wednesday, February 5). The Henry Hub spot price fell from $1.92/MMBtu last Wednesday to $1.85/MMBtu yesterday.
  • At the New York Mercantile Exchange (Nymex), the February 2020 contract expired last Wednesday at $1.877/MMBtu. The March 2020 contract price remained unchanged Wednesday to Wednesday at $1.861/MMBtu. The price of the 12-month strip averaging March 2020 through February 2021 futures contracts declined 3¢/MMBtu to $2.147/MMBtu.
  • The net withdrawal from working gas totaled 137 Bcf for the week ending January 31. Working natural gas stocks total 2,609 Bcf, which is 31% more than the year-ago level and 8% more than the five-year (2015–19) average for this week.
  • The natural gas plant liquids composite price at Mont Belvieu, Texas, fell by 16¢/MMBtu, averaging $4.60/MMBtu for the week ending February 5. The prices of natural gasoline, ethane, butane, and isobutane fell by 5%, 2%, 6%, and 20%, respectively. The price of propane rose by 8%.
  • According to Baker Hughes, for the week ending Tuesday, January 28, the natural gas rig count decreased by 3 to 112, the lowest level since October 2016. The number of oil-directed rigs fell by 1 to 675. The total rig count decreased by 4, and it now stands at 790.

Prices/Supply/Demand:
Prices fall across most of the country. This report week (Wednesday, January 29, to Wednesday, February 5), the Henry Hub spot price fell 7¢ from $1.92/MMBtu last Wednesday to $1.85/MMBtu yesterday. The price of $1.85/MMBtu on Friday, January 31, was the lowest January Henry Hub price since at least 2014. At the Chicago Citygate, the price decreased 6¢ from $1.80/MMBtu last Wednesday to $1.74/MMBtu yesterday, with a low of $1.67/MMBtu on Friday. Chicago prices rebounded slightly as a cold front approached the Midwest....
....MUCH MORE
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