Natural gas outlook: EIA expects low end-of-season inventory

U.S. Energy Information Administration (EIA) projects working inventories of natural gas in storage will end the heating season at levels significantly lower than last year. This month’s Short-Term Energy Outlook projects that at the end of March, inventories will total 1,959 billion cubic feet (Bcf), which is lower than last year’s record high level but still greater than recent years. Last year at the end of March working inventories totaled 2,477 Bcf, which was the result of robust natural gas production combined with low demand from a warm winter. For much of this winter heating season, inventories have remained greater than the five-year ( 2008-2012) average and below the previous year’s levels.

EIA expects that total net additions to inventories over the 2013 summer injection season (April 1 to October 31) will total 1,961 Bcf. In the past 5 years, the overall net additions to working gas in storage during the injection season have averaged 2,032 Bcf. Due to the high end of winter inventories last year, net injections during the 2012 summer season only totaled 1,453 Bcf.

More summary data

Prices:

Natural gas prices rose modestly at most locations during the report week (Wednesday, March 6, to Wednesday, March 13), particularly in New England. Lingering cold temperatures in the Midwest and Northeast likely contributed to the price increases. Temperatures in New England were warmer than normal most days of the previous week, alleviating pressure on the Algonquin Citygate price, which fell from $7.77 per MMBtu last Wednesday to $5.80 per MMBtu on Tuesday. However, on Wednesday, the Algonquin Citygate price increased by 50 percent or $2.89 per MMBtu, likely due to expectations of colder temperatures on Thursday, and ended the week higher than it started at $8.69 per MMBtu. The snow and cold continue to be widespread in the Midwest and Northeast, providing support for the current price environment.

The Nymex April futures price rose from $3.470 per MMBtu last Wednesday to $3.680 per MMBtu yesterday. During the week, the futures price spread over the Henry Hub daily spot price averaged between -10 and 6 cents per MMBtu. The 12-Month Strip (average of April 2013 to March 2014 contracts) gained 16 cents per MMBtu, starting at $3.761 per MMBtu last Wednesday and landing at $3.916 per MMBtu yesterday.

According to estimates from BENTEK Energy Services LLC (Bentek), average natural gas consumption for the nation fell this report week by 11.5 percent over last week’s daily average. Natural gas consumption decreased in all sectors and most notably in the residential/commercial and power sectors, which fell by 15.7 and 12.7 percent, respectively, for the report week. This is the result of warmer weather in most parts of the country compared with the previous week.

Bentek estimates that the average daily natural gas supply for this report week increased modestly by 0.5 percent over the previous week’s daily average. Dry natural gas production and imports from Canada increased by 0.4 percent and 3.3 percent, respectively, from the previous week.

More price data

Storage

Working natural gas in storage decreased to 1,938 Bcf as of Friday, March 8, according to EIA's WNGSR. This represents an implied net withdrawal of 145 Bcf from the previous week. This week's net withdrawal was 71 Bcf larger than the 5-year average net withdrawal of 74 Bcf, and 79 Bcf larger than last year's average net withdrawal of 66 Bcf. Inventories are currently 440 Bcf (18.5 percent) less than last year at this time and 198 Bcf (11.4 percent) greater than the 5-year average of 1,740 Bcf.

All three storage regions posted declines this week. Inventories in the East, West, and Producing regions decreased by 92 Bcf (the 5-year average net withdrawal is 57 Bcf), 5 Bcf (the 5-year average net withdrawal is 7 Bcf), and 48 Bcf (the 5-year average net withdrawal is 10 Bcf), respectively. In the Producing region, working natural gas inventories decreased 15 Bcf (7.9 percent) in salt cavern facilities and decreased 33 Bcf (5.3 percent) in nonsalt cavern facilities.

Temperatures in the Lower 48 states averaged 38.0 degrees, compared to 44.4 degrees last year and the 30-year normal of 41.3 degrees. While overall temperatures were a few degrees cooler than normal, temperatures varied somewhat across Census divisions. In the South, the East South Central and South Atlantic Census divisions were particularly cool, averaging 9.1 and 8.0 degrees cooler, respectively, than the 30-year normal. In the Northeast, the New England Census division was relatively warm, averaging 2.6 degrees warmer than the 30-year normal. Heating degree-days nationwide were 11.8 percent above normal and 27.7 percent above last year.

More storage data

1. Help for flood affected farmers
2. Ag markets diverged significantly Friday afternoon
3. Vilsack: Food, Farm and Jobs Bill critical for U.S. producers
4. Ag markets decidedly mixed on Friday morning
5. Dairy among best snacks for diabetics
6. Farmers dodge showers to plant corn at breakneck pace

1. Beware of the soy milk after-taste face
2. Monsters love milk, too
3. What sick day? Farmers take just three a year
4. Salma Hayek: Milk part of 'perfect' breakfast
5. Activists at the door
6. IDFA: Opposition to Dairy Supply Management mounts

1. Analysis: Dairy Security Act better for farmers, taxpayers
2. IDFA: Opposition to Dairy Supply Management mounts
3. World food supply depends on character, virtuous leadership
4. Commentary: Slanting the statistics
5. Buffet concerned about soil and starvation
6. Cold spring stunts upper Midwest hay crop