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NATURAL GAS & CRUDE OIL WEEKLY UPDATE (31 OCT 2017)

NATURAL GAS & CRUDE OIL WEEKLY UPDATE (31 OCT 2017)

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NATURAL GAS WEEKLY UPDATE


In the News (EIA): 

Sabine Pass Train 4 reaches substantial completion:

The recently announced expansion of the Sabine Pass liquefied natural gas (LNG) terminal in Cameron Parish, Louisiana, will add to the rapid growth expected in LNG export capacity for the United States under construction through 2019. The fourth natural gas liquefaction unit—referred to in the industry as a train—at the Sabine Pass LNG terminal is substantially completed, according to an October 13 announcement by Cheniere Energy, Inc., which owns and operates the facility. Train 4 has the capacity to liquefy 0.7 billion cubic feet of natural gas per day (Bcf/d). Cheniere expects to begin commercial deliveries from Train 4 in March 2018. All of Train 4’s capacity has been contracted under 20-year long-term contracts: 0.5 Bcf/d to India’s state-run natural gas company, GAIL (India) Limited, and the remaining volumes to Shell and Cheniere’s global portfolios for trading in the spot LNG markets. GAIL is one of India’s largest LNG importers, with 1.1 Bcf/d of LNG imports in 2017 (44% of India’s total LNG imports). GAIL’s contract with Cheniere for off-take volumes from Train 4 includes a swap agreement with Swiss trading company Gunvor Group Ltd. Under this agreement, GAIL will purchase 15 LNG cargoes from Gunvor in 2017 for delivery to India, and Gunvor will purchase 10 cargoes from GAIL in 2018 from GAIL’s off-take volume from Sabine Pass Train 4 for trading in the global spot markets. In a form of commercial agreements typical at Sabine Pass, GAIL will pay between $3.00 per million British thermal unit (MMBtu) and $3.50/MMBtu plus 115% of the final settlement price for the New York Mercantile Exchange (Nymex) Henry Hub natural gas futures contract price for the month in which the cargo is scheduled for delivery. The Sabine Pass LNG terminal began export operations in February 2016 and currently has five trains in service or under construction, each with a capacity of about 0.7 Bcf/d. Trains 1-3 are fully operational, Train 4 is preparing to enter service as announced, and Train 5 is under construction and expected to enter service in August 2019. Train 6 has been approved by the Federal Energy Regulatory Commission (FERC), but has not yet reached a Final Investment Decision and is not yet under construction. Liquefaction capacity from all U.S. projects currently under construction will expand Lower 48 LNG export capacity by 1.5 Bcf/d in 2017, 0.9 Bcf/d in 2018, and 5.1 Bcf/d in 2019. Once all of these liquefaction projects become operational, the United States will have the third-largest liquefaction capacity in the world at 9.6 Bcf/d, after Australia and Qatar (11.4 Bcf/d and 10 Bcf/d, respectively).


Overview:

Natural gas spot prices rose at most locations this report week (Wednesday, October 18 to Wednesday, October 25). The Henry Hub spot price rose from $2.81 per million British thermal units (MMBtu) last Wednesday to $2.93/MMBtu yesterday. At the Nymex, the November 2017 contract price rose 6¢ from $2.854/MMBtu last Wednesday to $2.919/MMBtu yesterday. Net injections to working gas totaled 64 billion cubic feet (Bcf) for the week ending October 20. Working natural gas stocks are 3,710 Bcf, which is 5% lower than the year-ago level and 1% lower than the five-year (2012–16) average for this week. The natural gas plant liquids composite price at Mont Belvieu, Texas, fell by 5¢, averaging $7.95/MMBtu for the week ending October 25. The price of propane, butane, and isobutane fell by 2%, 1%, and 1%, respectively. The price of natural gasoline rose by 2%. The price of ethane remained flat week over week. According to Baker Hughes, for the week ending Friday, October 20, the natural gas rig count decreased by 8 to 177. The number of oil-directed rigs fell by 7 to 736. The total rig count decreased by 15, and it now stands at 913.


Prices/Supply/Demand:

Prices rise at most locations. This report week (Wednesday, October 18 to Wednesday, October 25), the Henry Hub spot price (the U.S. benchmark price for natural gas) rose 12¢ from $2.81/MMBtu last Wednesday to $2.93/MMBtu yesterday, while the average price over the report week decreased by 9¢ compared to the previous week’s average. At the Chicago Citygate, prices increased 27¢ from $2.74/MMBtu last Wednesday to $3.01/MMBtu yesterday, and the weekly average price increased 2¢. California prices are mixed. The price at SoCal Citygate increased 17¢ from $4.00/MMBtu last Wednesday to $4.17/MMBtu yesterday, and the weekly average price increased by $1.65/MMBtu. Spot prices in Southern California have been volatile during the past week due to outages and much warmer-than-normal weather. Southern California has experienced supply disruptions because of an unplanned outage on Line 235-2 and planned maintenance work on Line 4000—both pipelines on the Southern California Gas (SoCalGas) system—constraining natural gas supplies from the California border to SoCalGas’s North Coastal Zone, where Los Angeles is located. Also, temperatures in Southern California have been much warmer-than-normal, averaging 13 degrees Fahrenheit (°F) higher than NOAA’s 30-year normal (1981–2010). On Monday, temperatures in Southern California tied the second warmest on record. Prices for next-day delivery of natural gas at the SoCal Citygate reached a high of $12.57/MMBtu on Monday, the highest daily average price on record for the hub, according to data from Natural Gas Intelligence. Prices at PG&E Citygate in Northern California rose 1¢, up from $3.18/MMBtu last Wednesday to $3.19/MMBtu yesterday, while the weekly average price was unchanged. Northeast prices increase week over week, but weekly averages are mixed. At the Algonquin Citygate, which serves Boston-area consumers, prices went up 33¢ from $2.90/MMBtu last Wednesday to $3.23/MMBtu yesterday, but the weekly average price decreased 21¢. At the Transcontinental Pipeline Zone 6 trading point for New York, prices increased 14¢ from $2.79/MMBtu last Wednesday to $2.93/MMBtu yesterday, and the weekly average price increased 23¢. Prices at both hubs have averaged lower than prices at the Henry Hub over the same time period. Temperatures in Massachusetts and New York both averaged above normal last week and have further increased this week. Appalachian price movements are mixed. Tennessee Zone 4 Marcellus spot prices decreased 1¢ from $0.81/MMBtu last Wednesday to $0.80/MMBtu, and the weekly average price decreased by 7¢. Prices at Dominion South in northwest Pennsylvania rose 22¢ from $1.01/MMBtu last Wednesday to $1.23/MMBtu yesterday, while the weekly average price increased by 5¢. Natural gas prices at Dominion South have been trading much lower than the Henry Hub price. Last week the weekly average discount was $2.19/MMBtu, and this week the discount was $2.06/MMBtu. Supply increases. According to data from PointLogic Energy, the average total supply of natural gas rose by 1% compared with the previous week. Dry natural gas production grew by 1% compared with the previous report week. Average net imports from Canada increased by 2% from last week. Overall demand decreases. Total U.S. consumption of natural gas fell by 1% compared with the previous report week, according to data from PointLogic Energy. Natural gas consumed for power generation declined by 6% week over week. Industrial sector consumption increased by 1% week over week. In the residential and commercial sectors, consumption increased by 6%. Natural gas exports to Mexico decreased 1%. U.S. LNG exports increase. Natural gas pipeline deliveries to the Sabine Pass liquefaction terminal exceeded 3 Bcf/d last week, above the 2.8 Bcf/d nameplate capacity of Trains 1–4. Six LNG vessels (LNG-carrying capacity 21.4 Bcf) departed the Sabine Pass terminal last week (Thursday to Wednesday), and one vessel (LNG-carrying capacity 3.8 Bcf) was loading at the terminal on Wednesday. LNG exports to date in October set a new record with 19 loaded vessels, exceeding the previous record set in May with 18 exported cargoes.


Storage:

Weekly net injections fall short of the five-year average. Net injections into storage totaled 64 Bcf for the week ending October 20, compared with the five-year (2012–16) average net injection of 75 Bcf and last year’s net injections of 74 Bcf during the same week. Decreased power demand for natural gas contributed to increased net injections compared with the previous report week. Net injections into storage were lower than the five-year average in all regions except the Midwest region. The South Central region accounted for most of the shortfall compared with the five-year average for the week, with net injections totaling 24 Bcf, or 7 Bcf lower than the five-year average net injection. Working gas stocks total 3,710 Bcf, which is 46 Bcf less than the five-year average and 189 Bcf less than last year at this time. Working gas stocks are poised to end the refill season lower than the five-year average. So far during the 2017 refill season, net injections into storage are 16% lower than the comparable five-year average—1,659 Bcf during the 2017 refill season compared with the five-year average increase of 1,970 Bcf. If net injections continue at 16% lower than the five-year average for the remaining three weeks, working gas stocks will reach 3,782 Bcf by the end of the refill season. Working gas stocks will total 3,796 Bcf if net injections into working gas match the five-year average for the remainder of the refill season. The January 2018 futures price trades at a discount compared with the current spot price. During the most recent storage week, the average natural gas spot price at the Henry Hub was $2.88/MMBtu, while the Nymex futures price of natural gas for delivery in January 2018 averaged $3.24/MMBtu, a difference of 36¢. The average natural gas spot price at the Henry Hub was 5¢ lower than the front-month futures price at the Nymex. A year ago, the spot price was 6¢ lower than the front-month contract. The reported net implied flows into storage are close to analysts’ expectations as the October futures contract is due to expire. According to the Desk survey of natural gas analysts, estimates of net injections into working natural gas storage ranged from 61 Bcf to 70 Bcf with a median of 65 Bcf. Prices for the futures contract for November delivery, which is due to expire on October 27, rose about 2¢/MMBtu to $2.91/MMBtu in light trading at the release of the Weekly Natural Gas Storage Report (WNGSR). The price of the contract for December delivery, which is due to become the prompt month on the expiration of the November contract, rose about 1¢/MMBtu to $3.07/MMBtu, with 483 trades executed at the release. Prices declined somewhat in subsequent trading, averaging roughtly $3.05/MMBtu. Temperatures decline on the week and remain higher than normal in most regions. Temperatures in the Lower 48 states averaged 61°F, 4°F higher than the normal and 4°F lower than last year at this time. During the prior report week ending October 12, temperatures averaged 66°F.


CRUDE OIL WEEKLY UPDATE                    

 

Summary (EIA):

U.S. crude oil refinery inputs averaged over 16.0 million barrels per day during the week ending October 20, 2017, 586,000 barrels per day more than the previous week’s average. Refineries operated at 87.8% of their operable capacity last week. Gasoline production decreased last week, averaging over 9.9 million barrels per day. Distillate fuel production increased last week, averaging 4.8 million barrels per day. U.S. crude oil imports averaged over 8.1 million barrels per day last week, up by 640,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 7.6 million barrels per day, 3.2% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 233,000 barrels per day. Distillate fuel imports averaged 133,000 barrels per day last week. U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 0.9 million barrels from the previous week. At 457.3 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year. Total motor gasoline inventories decreased 5.5 million barrels last week, but are in the upper half of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories decreased by 5.2 million barrels last week and are in the lower half of the average range for this time of year. Propane/propylene inventories decreased by 1.2 million barrels last week and are in the lower half of the average range. Total commercial petroleum inventories decreased by 12.2 million barrels last week. Total products supplied over the last four-week period averaged over 19.6 million barrels per day, down by 3.6% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 9.3 million barrels per day, up by 1.6% from the same period last year. Distillate fuel product supplied averaged 3.8 million barrels per day over the last four weeks, down by 6.5% from the same period last year. Jet fuel product supplied is up 2.9% compared to the same four-week period last year. The WTI price was $51.63 per barrel on October 20, 2017, $0.20 above last week’s price and $1.02 over a year ago. The spot price for conventional gasoline in the New York Harbor was $1.745 per gallon, $0.054 more than last week’s price and $0.171 higher than a year ago. The spot price for No. 2 heating oil in the New York Harbor was $1.727 per gallon, $0.052 over last week’s price and $0.231 above a year ago. The national average retail regular gasoline price decreased for the sixth week in a row to $2.479 per gallon on October 23, 2017, $0.010 less than last week’s price but $0.236 more than a year ago. The national average retail diesel fuel price increased to $2.797 per gallon, $0.010 per gallon over last week and $0.319 above a year ago.

Amy Anderson No Comments

Natural Gas & Crude Oil Weekly Update (Oct 22 to 28)

Natural Gas & Crude Oil Weekly Update (Oct 22 to 28)


Natural Gas

In the News (EIA):
EIA’s Winter Fuels Outlook, released on October 11, 2017, forecasts that households that heat primarily with natural gas will spend $69 (12%) more this winter compared with last winter, largely due to a 9% increase in forecast consumption and a 2% increase in price. The forecast average expenditures of households heating with natural gas are comparable to the previous five-winter average. EIA forecasts that residential natural gas consumption will average 62 thousand cubic feet (Mcf) per household from October 2017 through March 2018. The increase in consumption compared to last winter is based on a 13% increase in heating degree days, and the forecast return to normal winter temperatures. Winter natural gas prices to residential customers will average $10.36/Mcf, according to the Winter Fuels Outlook. On a per Mcf basis, residential and the Henry Hub price are forecast to increase this winter about the same amount, 18 cents and 16 cents, respectively, from last winter. Natural gas consumption peaks during the winter season, with nearly half of U.S. homes using natural gas as their primary heating fuel. Compared to last winter, EIA forecasts higher natural gas use and supply. EIA expects increased consumption in all sectors – residential/commercial (higher by 2.9 billion cubic feet per day (Bcf/d)), net exports of both liquefied natural gas and pipeline (2.0 Bcf/d), electric power (1.5 Bcf/d), and industrial (0.8 Bcf/d). This increase in consumption will be offset by 5.8 Bcf/d in production and 1.0 Bcf/d in withdrawals from storage. EIA projects natural gas inventories will reach 3.8 trillion cubic feet (Tcf) at the end of October, based on expected injection rates. The rate of inventory builds since the start of injection season in April was lower than the five-year average. However, cooler-than-average temperatures in August reduced the use of natural gas for electricity generation and builds for the end of summer were above the five-year average. EIA’s Winter Fuels Outlook, which includes scenarios where temperatures are 10% above and below current forecast levels, is a supplement to EIA’s Short-Term Energy Outlook (STEO).
Overview:
Natural gas spot prices were mixed this report week (Wednesday, October 11 to Wednesday, October 18). The Henry Hub spot price fell from $2.93/MMBtu last Wednesday to $2.81/MMBtu yesterday. At the New York Mercantile Exchange (Nymex), the November 2017 contract price fell 3¢ from $2.889/MMBtu last Wednesday to $2.854/MMBtu yesterday. Net injections to working gas totaled 51 Bcf for the week ending October 13. Working natural gas stocks are 3,646 Bcf, 5% lower than the year-ago level and 1% lower than the five-year (2012-16) average for this week. The natural gas plant liquids composite price at Mont Belvieu, Texas, rose by 1¢, averaging $7.93/MMBtu for the week ending October 18. The price of ethane fell by 1%. The price of natural gasoline rose by 2%. The prices of propane, butane, and isobutane were essentially flat. According to Baker Hughes, for the week ending Friday, October 13, the natural gas rig count decreased by 2 to 185. The number of oil-directed rigs fell by 5 to 743. The total rig count decreased by 8, and it now stands at 928.
Prices/Supply/Demand:
Prices mixed as a result of cooler temperatures. Temperatures cooled throughout the country this report week, except in the Southwest. This reduced cooling demand along the Gulf Coast and increased home heating demand in the northern states. This report week (Wednesday, October 11 to Wednesday, October 18), the Henry Hub spot price fell 12¢ from $2.93/MMBtu last Wednesday to $2.81/MMBtu yesterday. At the Chicago Citygate, prices decreased 5¢ to $2.74/MMBtu yesterday. Prices at PG&E Citygate in Northern California rose 5¢, up from $3.13/MMBtu last Wednesday to $3.18/MMBtu yesterday. The price at SoCal Citygate increased 86¢ from $3.14/MMBtu last Wednesday to $4.00/MMBtu yesterday. The SoCal Citygate price hit an intra-week high of $5.30/MMBtu on Monday, stemming from hot weather in Los Angeles combined with pipeline outages that are hindering natural gas deliveries across California’s southern border. Northeast prices rise. Temperatures in the Northeast fell, pushing up home heating demand in Boston and New York City. At the Algonquin Citygate, which serves Boston-area consumers, prices went up 40¢ from $2.50/MMBtu last Wednesday to $2.90/MMBtu yesterday. At the Transcontinental Pipeline Zone 6 trading point for New York, prices increased 17¢ from $2.62/MMBtu last Wednesday to $2.79/MMBtu yesterday. Appalachian prices low as a result of outages. Tennessee Zone 4 Marcellus spot prices increased 1¢ from 80¢/MMBtu last Wednesday to 81¢/MMBtu yesterday. Prices at Dominion South in northwest Pennsylvania rose 9¢ to $1.01/MMBtu yesterday. The price hit a remarkable intra-week low of 32¢/MMBtu last Thursday because of a force majeure on the Texas Eastern Pipeline caused by an unplanned compressor outage in Ohio. This sharply restricted southbound flows of natural gas and caused regional prices to drop temporarily. Supply is up slightly on elevated production. According to data from PointLogic Energy, the average total supply of natural gas rose by 1% compared with the previous week. Dry natural gas production grew by 2% compared with the previous report week. Average net imports from Canada decreased by 3% from last week. Overall demand is flat. Total U.S. consumption of natural gas was unchanged from last week, averaging 57.1 Bcf/d, according to data from PointLogic Energy. Decreases in electric sector demand for natural gas this week were offset by increases in demand for home and building heating. Natural gas consumed for power generation declined by 12% week over week, industrial sector consumption increased by 3%, and residential/commercial sector consumption increased by 30%. Natural gas exports to Mexico increased 2%. U.S. LNG exports decrease. Three vessels (LNG-carrying capacity totaling 11.2 Bcf) departed the Sabine Pass liquefaction facility last week (Thursday to Wednesday), and one vessel (LNG-carrying capacity 3.8 Bcf) was loading at the terminal on Wednesday.
Storage:
Weekly net injections fall short of the five-year average. Net injections into storage totaled 51 Bcf for the week ending October 13, 2017, compared with the five-year (2012-16) average net injection of 78 Bcf and last year’s net injections of 77 Bcf during the same week. Increased power demand for natural gas contributed to decreased net injections compared with the previous report week. Net injections into storage were lower than the five-year average in all regions except the East region and Midwest region. The South Central region accounted for most of the shortfall compared with the five-year average for the week, with net injections totaling 1 Bcf, or 29 Bcf lower than the five-year average net injection. Working gas stocks total 3,646 Bcf, or 35 Bcf less than the five-year average and 179 Bcf less than last year at this time. Working gas stocks are poised to end the refill season lower than the five-year average. So far during the 2017 refill season, net injections into storage are 16% lower than the comparable five-year average-1,595 Bcf during the 2017 refill season compared with the five-year average increase of 1,895 Bcf. If net injections continue at 16% lower than the five-year average for the remaining three weeks, working gas stocks will reach 3,781 Bcf by the end of the refill season. Working gas stocks will total 3,807 Bcf if net injections into working gas match the five-year average for the remainder of the refill season. The January 2018 futures price continues trading at a premium over the current spot price. During the most recent storage week, the average natural gas spot price at the Henry Hub was $2.90/MMBtu, while the Nymex futures price of natural gas for delivery in January 2018 averaged $3.19/MMBtu, a difference (premium) of 28¢. The premium was 44¢ a year ago. The average natural gas spot price at the Henry Hub was 1¢ higher than the front-month futures price at the Nymex. A year ago, the spot price was 11¢ lower than the front-month contract. The reported net implied flows into storage are close to analysts’ expectations, and trading on the Nymex at the release of the WNGSR was elevated. According to the Desk survey of natural gas analysts, estimates of net injections into working natural gas storage ranged from 42 Bcf to 64 Bcf with a median of 51 Bcf. Prices for the futures contract for November delivery fell about 2¢/MMBtu to $2.84/MMBtu with 1,657 contracts traded at the release of the Weekly Natural Gas Storage Report (WNGSR). Prices remained close to that level in subsequent trading. Temperatures are higher than normal in most regions. Temperatures in the Lower 48 states averaged 66 degrees Fahrenheit (°F), 7°F higher than the normal and 2°F higher than last year at this time. The Mountain Census division was the only region reporting cooler-than-normal temperatures, averaging 55°F, or 2°F lower than the normal and 3°F lower than last year at this time.

Crude Oil

Summary (EIA):
U.S. crude oil refinery inputs averaged over 15.4 million barrels per day during the week ending October 13, 2017, 819,000 barrels per day less than the previous week’s average. Refineries operated at 84.5% of their operable capacity last week. Gasoline production increased last week, averaging over 10 million barrels per day. Distillate fuel production decreased last week, averaging 4.8 million barrels per day. U.S. crude oil imports averaged 7.5 million barrels per day last week, down by 134,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.4 million barrels per day, 1.9% below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 690,000 barrels per day. Distillate fuel imports averaged 107,000 barrels per day last week. U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 5.7 million barrels from the previous week. At 456.5 million barrels, U.S. crude oil inventories are near the upper limit of the average range for this time of year. Total motor gasoline inventories increased 0.9 million barrels last week, and are in the upper half of the average range. Finished gasoline inventories increased last week, but blending components inventories decreased last week. Distillate fuel inventories increased by 0.5 million barrels last week and are in the lower half of the average range for this time of year. Propane/propylene inventories decreased by 0.1 million barrels last week and are in the lower half of the average range. Total commercial petroleum inventories decreased by 8.7 million barrels last week. Total products supplied over the last four-week period averaged over 19.9 million barrels per day, down by 0.7% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.3 million barrels per day, up by 2.9% from the same period last year. Distillate fuel product supplied averaged over 3.7 million barrels per day over the last four weeks, down by 6.4% from the same period last year. Jet fuel product supplied is up 2.5% compared to the same four-week period last year. The WTI price was $51.43 per barrel on October 13, 2017, $2.09 above last week’s price and $1.08 over a year ago. The spot price for conventional gasoline in the New York Harbor was $1.691 per gallon, $0.059 greater than last week’s price and $0.150 higher than a year ago. The spot price for ultra-low sulfur diesel fuel in the New York Harbor was $1.795 per gallon, $0.050 higher than last week’s price and $0.240 over a year ago. The national average retail regular gasoline price decreased to $2.489 per gallon on October 16, 2017, $0.015 lower than last week’s price but $0.232 more than a year ago. The national average retail diesel fuel price increased to $2.787 per gallon, $0.011 per gallon above last week and $0.306 above a year ago.