Natural Gas Report: Northeastern Pipeline Capacity Increases Limit Price

November 14, 2013 08:59 AM


  • Inventories stand at 3,834 Billion cubic feet (Bcf) -- 2.0% below year-ago and 1.5% above the five-year average.
  • This week notes a 20 Bcf gain in storage, right in line with expectations.
  • Pipeline capacity increases in the Northeast pressured prices despite local demand hikes.
  • Imports from Canada increased by 14.1%.

natgas11 14

December 13 natural gas opened today at $3.55 and ranged higher through the afternoon. A violation of $3.48 would clear bears' path to $3.37 from earlier this week and from there, $3.15 from February. The next resistance hurdle will be pivots around $3.65 and above that $3.91. But the last two days have watched natgas futures test $3.66 twice with the contract moving lower after.

According to EIA, "as reported in October, natural gas pipeline expansions were slated to add nearly 1 billion cubic feet per day (Bcf/d) of capacity to flow gas to markets in New York and New Jersey on November 1. These expansions happened on schedule, increasing access for consumers in the New York City metropolitan area to natural gas produced in the Appalachian Basin's Marcellus Shale play. This has resulted in lower gas prices for New York consumers, and has eased supply backup in the Marcellus Basin.

boxFor the first 13 days of this month, prices have declined year-on-year at the Transco Zone 6 New York trading point by 40 cents per million British thermal units (MMBtu) compared to the national benchmark Henry Hub spot price in Erath, Louisiana. So far this month, November’s flows are 14% above flows for the same days in 2012. Although November demand has been slightly higher in 2013 than 2012, increased supply capacity has contributed to lower prices."

The average temperature in the continental United States during the report week was 51°F -- 1.1°F warmer than the same time last year and 2.1 degrees above the 30-year average temp. The longer temperatures hold home heat demand at bay, the more storage can build and the lower prices will be near-term.

Prices --

The Henry Hub spot price firmed 23 cents over the report week to $3.68/MMBtu yesterday from $3.45 last Wednesday. Last week marked the Henry Hub's lowest price point in 12 weeks. The twelve month strip gained 4.5 cents week-over to $3.665/MMBtu.

Consumption --

Consumption firmed by 15.6% from the previous week, led by a 31.5% increase in residential and commercial consumption and a 6.1% increase in power sector consumption.chart

Net imports of natural gas from Canada increased by 14.1% as net imports into the Northeast were almost double the previous week. Imports of LNG increased over the report week, notably at the Everett terminal in Massachusetts, but continue to be a small contributor to total U.S. natural gas supply, according to EIA.

Storage --

Working natural gas in storage rose to 3,834 Billion cubic feet as of Nov. 8. The 20-Bcf gain in storage levels was much larger than last year at the same time when injections totaled -12 Bcf to post a net withdraw, and slightly above the five-year average build of 19 Bcf.

Data, supply graphs and indicated text provided by EIA.

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