Spot prices remain well below their year-ago levels. Last year, on February 23, the Henry Hub price settled at $3.83 per MMBtu. The price last year at Transcontinental Pipeline's Zone 6 trading point for delivery into New York City was $8.38 per MMBtu (compared to a price of $2.88 per MMBtu yesterday), and last year's Algonquin Citygate price was $8.80 per MMBtu. Abundant production and storage over the past year have played a role in the price declines.
Supply declined slightly this week, as production remained flat and pipeline imports and LNG sendout declined, according to data reported by BENTEK Energy, LLC (Bentek). Although overall Canadian imports declined 11.5 percent from last week, imports from Canada to the West increased over the previous week, likely the result of increased power demand in the Pacific Northwest. LNG sendout declined after rising to relative highs last week to meet increased demand from cold weather, according to Bentek.
Demand declined after rising last week in response to the cold. Domestic consumption fell by 15.5 percent during the week, but was 9.7 percent greater than last year. The year-over-year increase this week was driven by a large increase in use of natural gas for electric power generation. Bentek data show that use of natural gas for power generation is higher than last year in seven of the eight regions it reports. Texas and the Southeast United States, which are particularly dependent on natural gas for power generation, have seen large year-over-year increases in power burn.
The NYMEX near-month futures contract rose during the week by more than 20 cents. The March 2012 contract increased from $2.425 per MMBtu last Wednesday to $2.643 yesterday, possibly reflecting expectations for a large natural gas inventory withdrawal report. The 12-month strip (the average of the 12 contracts from March 2012 to February 2013) rose from $3.044 last Wednesday to $3.175 yesterday.
Working natural gas in storage fell to 2,595 Bcf as of Friday, February 17, according to EIA's WNGSR. This represents an implied net withdrawal of 166 Bcf from the previous week, which is 14 percent more than the 5-year average implied net withdrawal of 145 Bcf. Inventories in all three regions posted declines, with the East region contributing the most to this week's implied net withdrawal, with a decrease of 97 Bcf (a 7.3 percent decline from the previous week's level).
Stocks were 744 Bcf higher than the 5-year average level of 1,851 Bcf and 753 Bcf higher than last year at this time. Inventories in the Producing Region remain 343 Bcf (52.8 percent) above the 5-year average of 650 Bcf. Stocks in the East and West Regions are also above their 5-year averages by 300 Bcf (32.2 percent) and 102 Bcf (38.1 percent), respectively.