Prices generally softened over the past week but showed considerable daily volatility in the Northeast, as capacity bottlenecks arose. One local distribution company in the area experienced near-record customer demand on Sunday and Monday which taxed distribution capacity. The Northeast, as represented by Transco Zone 6 NY, illustrated this price action to an extreme. For the week, prices dropped from $9.88 per MMBtu last Wednesday to $8.30 per MMBtu yesterday, representing a 16 percent drop overall. However, from Friday to Monday, prices dropped $10.79 per MMBtu, a swing exceeding 100 percent. Leading up to the Friday peak were gains of $4.43 and $4.56 per MMBtu on Thursday and Friday, respectively.
The overall softness in gas prices ran counter to an overall rebound in natural gas consumption and an increase in production. According to estimates from BENTEK Energy Services, LLC, domestic consumption this week increased by 3.4 percent over the previous week. An increase in power and industrial consumption of 1.4 and 4.6 percent, respectively, was the primary contributor. A 3.7 percent increase in residential consumption further added to the sector gains.
According to BENTEK estimates, total supply of natural gas increased this week by 1.6 percent. Domestic production was up by 1.3 percent, accounting for the bulk of the increase. Canadian imports were up 4.5 percent for the week and stand 14.2 percent above year-ago levels. Things were little changed in the liquefied natural gas (LNG) arena where imports remained nearly 38.1 percent below the corresponding week last year.
At the NYMEX, the price of the February 2011 contract decreased 7.1 cents, from $4.561 per MMBtu to $4.491 per MMBtu. During intraweek trading, maximum daily price swings oscillated up 17.5 cents and down 8.8 cents per MMBtu in response to the changing weather forecasts reported in the trade press.
Working natural gas in storage fell to 2,542 Bcf as of Friday, January 21, according to EIA’s WNGSR (see Storage Figure). The net decline of 174 Bcf is larger than the 5-year average decline of 152 Bcf and last year’s decline of 109 Bcf for the report week. Stocks are now just 29 Bcf above the 5-year average and 9 Bcf above last year.
The week’s draw was substantially larger than last year, bringing stocks almost even with the previous winter’s levels.Last week’s year-over-year difference of 74 Bcf was nearly eliminated in a single week. This was largely the result of last year being unseasonably warm during the equivalent week, necessitating a relatively small draw. If colder weather continues, stocks could fall below last year’s levels despite significant year-over-year production growth.