A pipeline explosion Tuesday morning on Florida Gas Transmission's (FGT) system is expected to have little effect on prices. The explosion occurred in Washington Parish, Louisiana, and no injuries were reported. While prices at the FGT Zone 3 trading point have risen $0.17 per MMBtu since Monday, these increases are more or less consistent with other prices in the region. Various trade press sources have noted that the availability of spare capacity on pipelines in the region will offset the impact of the explosion. Bentek said in an analysis report that it does not expect further upward pressure on prices as a result of the explosion. The spot price at FGT ended the week at $4.18 per MMBtu.
Total supply declined 0.5% during the week. According to Bentek data, dry gas production declined 0.6% during the week, as maintenance in several regions curtailed some production for the past several days. Despite the decline this week, production remains 1.2% above its year-ago level. Declines in production were partly offset by a 1.4% increase in Canadian imports week over week. Consumption increased 0.9% during the week. A 5.6% increase in power consumption was partially offset by decreases in industrial, residential, and commercial use. Power burn increased in most areas of the country. In the Southeast (the largest consumer of natural gas for power generation), consumption of natural gas for power generation increased 11.8%.
At the Nymex, the futures price rose during the week. The price of the July 2013 contract rose from $3.777 per MMBtu last Wednesday to $3.963 yesterday. The 12-month strip (the average of the 12 contracts between July 2013 and June 2014) increased from $3.949 per MMBtu last Wednesday to $4.097 yesterday.
Both short-term issues like end-user maintenance and long-term fundamental issues led to substantial declines in NGL prices. Williams Company shut down its olefins facility in Geismar, Louisiana, for unplanned maintenance Thursday following an explosion; additionally, CP Chemicals Group's Port Arthur, Texas, ethylene cracker is offline for planned maintenance. These events put downward pressure on ethane and butane prices. In addition to short-term maintenance outages, longer term fundamentals have also put downward pressure on prices, particularly on butane. Increases in supply, export constraints, and declines in gasoline demand (butane is used as a blending agent) have all led to price declines.