While most of the United States has experienced a much warmer-than-normal winter, the Pacific Northwest has actually been cold and dry this year, leading to increased use of natural gas for power generation and a forecast for less hydropower supply this summer, according to recent analysis by BENTEK Energy, LLC (Bentek). Bentek reported that forecasts by the Northwest River Forecast Center for the water supply for the 2012 hydro year are about 91 percent of normal levels, a turnaround from last year, when oversupply of hydro led regulators to curtail thermal and wind generation.
Average year-to-date 2012 power burn in the Pacific Northwest (although relatively small to begin with, as the result of the region’s hydroelectric infrastructure) has close to doubled compared to last year; power burn has averaged 590.7 million cubic feet per day (MMcf/d) so far in 2012, compared to 299.2 MMcf/d from January 1 – February 8, 2011. (However, in 2011, natural gas power burn in the Pacific Northwest was lower than the five year average.)
Although natural gas prices at the Sumas hub have fallen from last year, prices have seen increases this month. Additionally, the basis to the Henry Hub has risen substantially in the past several months. Last year, on average, Sumas prices traded below Henry Hub prices; this pattern has reversed in the past several months. Also putting upward pressure on Sumas prices is maintenance on a compressor station on Northwest Pipeline’s system. The Willard Compressor Station has been limiting supply from the Rocky Mountains and Alberta this week, according to Bentek analysis.
(For the Week Ending Wednesday, February 8, 2012)
- A temporary return to more normal seasonal temperatures was likely the catalyst that caused natural gas prices to reverse their recent multi-week downtrend. The Henry Hub price closed at $2.49 per million British thermal units (MMBtu) on February 8, up 17 cents for the week.
- At the New York Mercantile Exchange (NYMEX), the March 2012 natural gas contract rose 6.6 cents per MMBtu for the week to close at $2.448 per MMBtu.
- Working natural gas in storage eased slightly last week to 2,888 billion cubic feet (Bcf) as of Friday, February 3, according to the U.S. Energy Information Administration’s (EIA) Weekly Natural Gas Storage Report (WNGSR). The implied net withdrawal for the week was 78 Bcf, positioning storage volumes 714 Bcf above year-ago levels.
- The natural gas rotary rig count, as reported February 3 by Baker Hughes Incorporated, decreased by 32 to 745 active units. Meanwhile, oil-directed rigs increased by 20 to 1,245 units.