According to the U.S. Energy Information Administration (EIA) website news article published on December 22, 2022:
Natural gas spot prices in the western United States nearly reached or exceeded $50.00/MMBtu in December
On December 21, 2022, daily natural gas spot prices at three major trading hubs in the western United States—Pacific Gas & Electric (PG&E) Citygate, Sumas on the Canada-Washington border, and Malin, Oregon—settled higher than $50.00 per million British thermal units (MMBtu), the highest level of any other market and an average of $48.12/MMBtu above Henry Hub, the national benchmark natural gas price. PG&E Citygate in Northern California and Malin, Oregon, the northern delivery point into the PG&E service territory, reported the highest natural gas spot prices since December 2000, according to pricing data from Natural Gas Intelligence. The price at Southern California (SoCal) Citygate reached its highest level for the month on December 13 at $49.67/MMBtu.
Several events occurring simultaneously at this point in the season contributed to prices rising to these levels:
- Widespread, below-normal temperatures
- High natural gas consumption
- Reduced natural gas flows
- Pipeline constraints, including maintenance in West Texas
- Low natural gas storage levels in the Pacific region
From the end of November to mid-December, below-normal temperatures stretched from Western Canada to California, leading to increased demand for natural gas for heating. In the first three weeks of December, natural gas consumption in the residential and commercial sectors in the Pacific Northwest and California combined increased by 23% from the second half of November, and in the electric power sector, natural gas consumption increased 14%, according to data from Point Logic.
Natural gas supply did not keep pace with the increased demand. Net natural gas flows from Canada to the western region, which relies heavily on supply from other parts of the United States and Canada, were down by 4% in the first three weeks of December compared with the second half of November, and natural gas deliveries from the Rocky Mountains into the Pacific Northwest were 9% lower over the same period.
Reduced pipeline capacity because of maintenance in West Texas led to lower westbound natural gas flows, putting upward pressure on Southern California natural gas prices. In addition, Pacific region natural gas storage inventories, which were 25% below year-ago levels and 30% below the five-year average as of December 16, also contributed to increasing prices. In Northern California, PG&E’s injections to rebuild natural gas inventories have not kept pace with previous summers.
While daily natural gas spot prices at PG&E Citygate and Malin reached their highest levels in more than 20 years, SoCal Citygate and Sumas recorded higher prices within the past four years. The natural gas spot price at SoCal Citygate reached an historic high of $144.00/MMBtu on February 12, 2021, because of cold weather and production disruptions in Texas. On March 1, 2019, the natural gas spot price at Sumas averaged $161.33/MMBtu because of supply constraints and unseasonably cold temperatures. An October 2018 explosion on Westcoast Energy’s BC Pipeline led to higher prices at Sumas during the winter of 2018–2019. On November 15, 2018, the Sumas natural gas spot price reached $69.25/MMBtu.
Market Highlights:
(For the week ending Wednesday, December 21, 2022)
Prices
- Henry Hub spot price: The Henry Hub spot price fell 46 cents from $6.60 per million British thermal units (MMBtu) last Wednesday to $6.14/MMBtu yesterday.
- Henry Hub futures prices: The price of the January 2023 NYMEX contract decreased $1.098 from $6.430/MMBtu last Wednesday to $5.332/MMBtu yesterday. The price of the 12-month strip averaging January 2023 through December 2023 futures contracts declined 61.8 cents to $4.872/MMBtu.
- Select regional spot prices: Natural gas spot prices were mixed this report week (Wednesday, December 14, to Wednesday, December 21), rising at locations in the West and Midwest and falling at locations in the East. Week-over-week price changes ranged from a $33.78/MMBtu increase at PG&E Citygate to a $3.66/MMBtu decrease at Algonquin Citygate.
- Natural gas prices continue to be volatile in the West, increasing significantly this week at all major locations. The price at PG&E Citygate in Northern California, which recorded the largest week-over-week increase, at $33.78/MMBtu, rose from $23.29/MMBtu last Wednesday to $57.07/MMBtu yesterday. At Malin, Oregon, the northern delivery point into the PG&E service territory, the price rose $32.18 from $23.20/MMBtu last Wednesday to $55.38/MMBtu yesterday. The price at Sumas on the Canada-Washington border increased $25.11 from $25.22/MMBtu last Wednesday to $50.33/MMBtu yesterday. In Wyoming, prices rose at two major hubs which are key sources of supply for the West Coast: at the Opal Hub, the price increased $26.41 from $26.37/MMBtu last Wednesday to $52.78/MMBtu yesterday, and the price at the Cheyenne Hub in southeast Wyoming rose $29.15 from $5.73/MMBtu last Wednesday to $34.88/MMBtu yesterday. The price at SoCal Citygate in Southern California increased $21.85 from $26.89/MMBtu last Wednesday to $48.74/MMBtu yesterday.
- At the Chicago Citygate, the price increased $11.98 from $5.71/MMBtu last Wednesday to $17.69/MMBtu yesterday. Temperatures in the Chicago Area averaged 24°F this report week, 6°F below normal, which resulted in 283 heating degree days (HDDs), 37 HDDs more than normal and 94 HDDs more than last week. Natural gas consumption in the Mid-Continent Region increased 29% (6.1 Bcf/d) week over week, driven by a 45% increase (4.8 Bcf/d) in the residential and commercial sectors, according to data from PointLogic.
- In the Northeast at the Algonquin Citygate, which serves Boston-area consumers, the price went down $3.66 from $10.17/MMBtu last Wednesday to $6.51/MMBtu yesterday. At the Transcontinental Pipeline Zone 6 trading point for New York City, the price decreased $1.99 from $8.28/MMBtu last Wednesday to $6.29/MMBtu yesterday. The Tennessee Zone 4 Marcellus spot price decreased 97 cents from $5.53/MMBtu last Wednesday to $4.56/MMBtu yesterday. The price at Eastern Gas South in southwest Pennsylvania fell 63 cents from $5.35/MMBtu last Wednesday to $4.72/MMBtu yesterday. Above-average temperatures in the Boston Area this week resulted in 18 fewer HDDs than normal.
- Daily spot prices by region are available on the EIA website.International futures prices: International natural gas futures price movements were mixed this report week. According to Bloomberg Finance, L.P., weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia increased 96 cents to a weekly average of $34.42/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, decreased $7.47 to a weekly average of $34.99/MMBtu.
- Natural gas plant liquids (NGPL) prices: The natural gas plant liquids composite price at Mont Belvieu, Texas, remained relatively unchanged at $7.59/MMBtu for the week ending December 21. Ethane prices remained relatively unchanged, while natural gas prices at the Houston Ship Channel rose 5% week over week, narrowing the ethane premium to natural gas by 30%. Ethylene spot prices rose 2%, widening the ethylene to ethane premium by 4%. Propane prices fell 3%, while the weekly average price of Brent crude oil rose 2%, resulting in a 9% increase in the propane discount relative to crude oil. Normal butane prices rose 3%, isobutane prices rose 2%, and natural gasoline prices rose 3%.
Supply and Demand
- Supply: According to data from PointLogic, the average total supply of natural gas rose by 0.2% (0.2 Bcf/d) compared with the previous report week. Dry natural gas production decreased by 0.9% (0.9 Bcf/d) to average 99.4 Bcf/d, and average net imports from Canada increased by 20.1% (1.1 Bcf/d).
- Demand: Total U.S. consumption of natural gas rose by 15.5% (14.5 Bcf/d) compared with the previous report week, according to data from PointLogic. Natural gas consumed for power generation increased by 8.2% (2.6 Bcf/d) week over week. Natural gas consumption in the industrial sector increased by 4.9% (1.2 Bcf/d), and in the residential and commercial sectors, natural gas consumption increased by 28.6% (10.7 Bcf/d). Below-normal temperatures throughout much of the United States this report week led to increased heating demand. Natural gas exports to Mexico increased 4.4% (0.2 Bcf/d), and natural gas deliveries to U.S. LNG export facilities (LNG pipeline receipts) averaged 12.7 Bcf/d, which was 0.4 Bcf/d higher than last week.
Liquefied Natural Gas (LNG)
- Pipeline receipts: Overall natural gas deliveries to U.S. LNG export terminals increased by 0.4 Bcf/d week over week to average 12.7 Bcf/d this report week, according to data from PointLogic. Natural gas deliveries to LNG export terminals in South Louisiana increased by 0.4 Bcf/d week over week to 9.3 Bcf/d, and natural gas deliveries to all other terminals were essentially unchanged averaging close to 3.5 Bcf/d. According to Gulf South Pipeline, natural gas deliveries to Freeport LNG have averaged about 20 million cubic feet per day since December 20.
- Vessels departing U.S. ports: Twenty-six LNG vessels (ten from Sabine Pass, five each from Cameron and Corpus Christi, three from Calcasieu Pass, two from Cove Point, and one from Elba Island) with a combined LNG-carrying capacity of 98 Bcf departed the United States between December 15 and December 21, according to shipping data provided by Bloomberg Finance, L.P.
Rig Count
- According to Baker Hughes, for the week ending Tuesday, December 13, the natural gas rig count increased by 1 rig from a week ago to 154 rigs. A gain of three rigs in the Haynesville offset a loss of one rig each in the Permian Basin and an unidentified producing region. The number of oil-directed rigs decreased by 5 rigs from a week ago to 620 rigs. The Permian added one rig, the DJ-Niobrara, Eagle Ford, and Williston each dropped one rig, and three rigs were dropped in unidentified producing regions. The total rig count, which includes 2 miscellaneous rigs, is now 776 rigs.
Storage
- The net withdrawals from storage totaled 87 Bcf for the week ending December 16, compared with the five-year (2017–2021) average net withdrawals of 124 Bcf and last year's net withdrawals of 60 Bcf during the same week. Working natural gas stocks totaled 3,325 Bcf, which is 22 Bcf (1%) more than the five-year average and 45 Bcf (1%) lower than last year at this time.
- According to The Desk survey of natural gas analysts, estimates of the weekly net change to working natural gas stocks ranged from net withdrawals of 80 Bcf to 104 Bcf, with a median estimate of 92 Bcf.
More storage data and analysis can be found on the Natural Gas Storage Dashboard and the Weekly Natural Gas Storage Report.
