Overview (For the Week Ending Wednesday, January 26, 2011)
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Prices generally softened over the past week but showed considerable daily volatility in the Northeast, as capacity bottlenecks arose. One local distribution company in the area experienced near-record customer demand on Sunday and Monday which taxed distribution capacity. The Northeast, as represented by Transco Zone 6 NY, illustrated this price action to an extreme. For the week, prices dropped from $9.88 per MMBtu last Wednesday to $8.30 per MMBtu yesterday, representing a 16 percent drop overall. However, from Friday to Monday, prices dropped $10.79 per MMBtu, a swing exceeding 100 percent. Leading up to the Friday peak were gains of $4.43 and $4.56 per MMBtu on Thursday and Friday, respectively.
The overall softness in gas prices ran counter to an overall rebound in natural gas consumption and an increase in production. According to estimates from BENTEK Energy Services, LLC, domestic consumption this week increased by 3.4 percent over the previous week. An increase in power and industrial consumption of 1.4 and 4.6 percent, respectively, was the primary contributor. A 3.7 percent increase in residential consumption further added to the sector gains.
According to BENTEK estimates, total supply of natural gas increased this week by 1.6 percent. Domestic production was up by 1.3 percent, accounting for the bulk of the increase. Canadian imports were up 4.5 percent for the week and stand 14.2 percent above year-ago levels. Things were little changed in the liquefied natural gas (LNG) arena where imports remained nearly 38.1 percent below the corresponding week last year.
At the NYMEX, the price of the February 2011 contract decreased 7.1 cents, from $4.561 per MMBtu to $4.491 per MMBtu. During intraweek trading, maximum daily price swings oscillated up 17.5 cents and down 8.8 cents per MMBtu in response to the changing weather forecasts reported in the trade press.
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Working natural gas in storage fell to 2,542 Bcf as of Friday, January 21, according to EIA's WNGSR (see Storage Figure). The net decline of 174 Bcf is larger than the 5-year average decline of 152 Bcf and last year's decline of 109 Bcf for the report week. Stocks are now just 29 Bcf above the 5-year average and 9 Bcf above last year.
The week's draw was substantially larger than last year, bringing stocks almost even with the previous winter's levels.Last week's year-over-year difference of 74 Bcf was nearly eliminated in a single week. This was largely the result of last year being unseasonably warm during the equivalent week, necessitating a relatively small draw. If colder weather continues, stocks could fall below last year's levels despite significant year-over-year production growth.
Temperatures were slightly warmer than normal in the lower 48 States during the week ending January 20, but considerably colder than last year. The National Weather Service's degree-day data show that the temperature in the lower 48 States last week averaged 33.7 degrees, 0.7 degrees warmer than normal.(See Temperature Maps and Data).The average temperature last year, however, was 39.1 degrees, making this the first time in four weeks that the current winter has been colder than the year before. Relatively warm weather in the West was mostly offset by colder than normal weather in most of the rest of the country.
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Other Market Trends
EIA Highlights Energy Supply and Demand in Brazil and the United Arab Emirates.
EIA released on January 25 a Country Analysis Brief (CAB) on Brazil, which has experienced rapid growth in energy consumption and production over the last decade. Natural gas made up only about 8 percent of Brazil's energy consumption in 2008, but according to EIA, natural gas could expand as a share of the energy mix in coming years due to efforts to diversify power generation. In the beginning of 2011, the country had 12.9 trillion cubic feet (Tcf) of proven natural gas reserves. Though reserves are substantial, growth in production over recent years has been slow, mostly due to lack of transportation capacity and low natural gas prices. The largest strides Brazil has made in production have been in ethanol and oil. In 2009, Brazil imported 298 Bcf of natural gas. This was a 24-percent drop from the previous year, caused by a decrease in natural gas demand and a public policy aimed at reducing imports. Brazil receives imports via pipeline from Bolivia as well as LNG imports from Nigeria and Trinidad and Tobago.
On January 13, EIA released a CAB on Qatar, a member of OPEC and an important exporter of LNG. Though the country has only produced LNG since 1997, Qatar has become the world's largest LNG exporter as a result of concentrated government interest on developing the sector and attracting foreign investors. In 2009, Qatar exported 1.8 Tcf of LNG, mainly to Japan, India, and South Korea. Qatar possesses about 14 percent of the world's natural gas reserves, or about 896 Tcf, as of January 1, 2011. Its level of reserves is the third-largest in the world, behind Russia and Iran. The majority of Qatar's natural gas is located in the offshore North Field. Energy consumption in Qatar is wholly hydrocarbon-based, with natural gas accounting for about 75 percent of energy consumption and oil accounting for 25 percent. Preliminary estimates from Qatar National Bank indicate that the oil and gas sectors accounted for over half of Qatar's 2010 GDP.
More CABs are available here: http://www.eia.gov/emeu/cabs/index.html
Natural Gas Transportation Update
See Weekly Natural Gas Storage Report for additional Natural Gas Storage Data.