Natural gas prices decrease on mild weather and reduced demand

Natural gas prices decreased on average by 5% in all markets except the Northeast, where several Marcellus trading locations posted gains. The Henry Hub spot price decreased from $2.74/MMBtu last Wednesday to $2.60/MMBtu yesterday. Moderate temperatures in the western half of the United States kept prices stable, with modest declines of 9¢-16¢/MMBtu in California and Arizona. Similarly, Midwest and Midcontinent prices decreased by 12¢-18¢/MMBtu, with regional averages closing the week at $2.72/MMBtu and $2.38/MMBtu, respectively. Prices in the Rocky Mountains declined slightly, by 5% on average, to close the week at $2.25/MMBtu at the Opal and Kern River markets in Wyoming.

New England prices are volatile on mixed weather. In New England, prices were volatile during the report week with a cold front moving in last weekend and the return of more seasonal temperatures at the end of the report week. The spot price at the Algonquin Citygate, which serves Boston consumers, almost tripled from $3.19/MMBtu on Wednesday to $8.94/MMBtu by Friday and continued to climb to $9.24/MMBtu on Monday, before falling to $3.00/MMBtu yesterday as temperatures moderated. Similarly, at the Tennessee Zone 6 200 line, serving Massachusetts, New Hampshire, and Rhode Island, prices reached $7.85/MMBtu on Friday, before falling back to $2.96/MMBtu yesterday, 11¢ lower than last Wednesday.

Prices in New York were also affected by changes in the temperatures, but to a more moderate degree. At Transcontinental Pipeline Zone 6, the trading point for New York City, prices began the week at $2.54/MMBtu, rising to $2.67/MMBtu by Friday, climbing further to $2.77/MMBtu on Tuesday, then falling to $2.36/MMBtu yesterday.

Marcellus-area prices strengthen, but remain low. The largest increase in the Marcellus area occurred on Tennessee's Zone 4 Marcellus location and Transcontinental's Leidy Line, where prices increased 39¢ to $1.61/MMBtu and 41¢ to $1.72/MMBtu, respectively, over the report week. At Dominion's South trading point, which serves customers in portions of Pennsylvania, Ohio, Maryland, West Virginia, and Virginia, prices increased by 11¢/MMBtu, from $1.59/MMBtu last Wednesday to $1.70/MMBtu yesterday.

Nymex prices mixed. The Nymex April contract moved out of the near-month position on Friday, settling at $2.590/MMBtu. The Nymex May contract, which became the near-month contract on Monday, opened the report week at $2.740/MMBtu last Wednesday and settled yesterday at $2.605/MMBtu. The 12-month strip (the 12 contracts between May 2015 and April 2016) fell from $2.991/MMBtu last Wednesday to $2.883/MMBtu yesterday.

Supply declines week-over-week, but dry gas production hits a 2015 record. Total natural gas supply declined 0.2% from last week. While imports from Canada decreased, dry-gas production increased 0.1% from last week, and is 8.4% higher than the same week last year. Dry production reached 73.3 Bcf/d on Monday, the highest level this year, and only 0.2 Bcf/d lower than the record of 73.5 Bcf/d set on December 20, 2014, according to Bentek data. Dry production averaged 72.0 Bcf/d during the first quarter of 2015, 8.9% higher than the same period in 2014. Total natural gas imported from Canada declined 3.3% from the previous week, as overall temperatures this week were milder and demand fell. However, regional imports were mixed, with imports into the West and Northeast declining by 3% and 41%, respectively, while imports into the Midwest rose by 38%. LNG sendout remained at minimal levels.

Consumption declines in all sectors. Consumption declined in all sectors, led by the decline in residential and commercial demand. Total domestic consumption fell 4.3% week over week, but was 2.7% higher than the same week last year. Residential and commercial consumption fell 8% (2.6 Bcf/d) from last week on reduced heating demand. Consumption of gas for electric power generation fell 1.6%, led by the declines in the Northeast, Midwest, Southeast, and Pacific Northwest. Industrial consumption declined 1.2%.


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