Bentek: Hub Flows Rise Despite Mild Weather, Shut-ins, High Storage Levels
Despite current mild weather, high storage levels and 1.3 Bcf/d of gas production still shut-in in the Gulf of Mexico due to hurricane damage last fall, the flow of natural gas at a number of major market points across the nation's gas pipeline grid is surprisingly higher this May compared to May 2005, according to the Bentek Energy Hub Flow report, which is made available on the Intelligence Press website along with price index information at each of the market points listed Bentek report.
"At Transco Zone 6 NY so far this May we are averaging 1,496,000 MMBtu/d compared to 1,332,000 MMBtu/d last May," said Bentek's Jim Simpson, vice president of operations at the Golden, CO-based consulting firm. "It's considerably higher. One would think that loads would be off and that the difference between last year and this year would taper off as May goes on, particularly given that storage is so high this year. I would expect flows into New York to be at least equal to or below what they were last year. I can't explain it. I find it pretty unusual.
"What I can see are that the flows into the New York area are higher. What we don't know is whether people are filling storage up this year really fast. Are people bringing even more gas to New York to put into the ground? With the price spread as wide as it is between now and next winter ($4.735 on Tuesday, comparing June and January futures), anybody who owns storage and uses it economically as opposed to operationally would want to bring more gas to New York and put it in the ground right now," said Simpson.
He noted that in Michigan, the state with the most working gas storage capacity in the nation with nearly 600 Bcf, flow volumes also are up sharply compared to last year. Michigan Consolidated volumes this May are up 54% to an average of 439,000 MMBtu/d. Transco Zone 6 NY hub flows are up 12% this May compared to last May. Northern Natural Demarc flows are up 10%. In contrast, Chicago Citygate flows are flat, but that may be because there were restrictions recently put in place by local distribution companies due to high linepack and storage levels.
The other exceptions to the trend include Northwest Sumas, where volumes are down 15% this May, PG&E Citygate, where volumes are off by about 10%, and Panhandle Eastern at Haven, KS, where flows are down 9%. Transco Station 65 flows also are down 1%, or 37,000 Dth/d, presumably because of continuing hurricane-related shut-ins.
"The flows don't lie," Simpson noted. "They are what they are. If there is maintenance at Opal, you'll see it in the flows. On SoCal and PG&E, those are deliveries to their citygates so you get the idea of what they are taking in on a daily basis."
Bentek's Hub Flow report, which has been combined with NGI's price indexes and price spreads to the Henry Hub on the Intelligence Press website, provide a direct insight into natural gas market fundamentals.
"I look at the graphs a lot because they really show you the volatility of flows over time," said Simpson. "Take SoCal, for example," he said. Flows there were down sharply on May 8, down to 2.2 Bcf/d, but they rebounded just as sharply on May 9 all the way to 2.8 Bcf/d and then moved a little lower on Wednesday to about 2.7 Bcf/d.
It has been mild in the Pacific Northwest so it's difficult to explain what has been going on at several supply and delivery points there. For example on May 8, the Malin, OR, flows were way down, but then spiked. "Malin usually takes in between 1.35 Bcf/d and 1.5 Bcf/d, and it dropped all the way down to 1.2 Bcf/d on May 8th and then spiked back up." Simpson also noted that Sumas was running in the upper 600,000 MMBtu/d area, but then spiked up to more than 700,000 MMBtu/d on May 9-10.
The flow volumes in the Bentek Hub Flow report are taken from the evening nominations cycle on the previous day. A report dated Wednesday, May 10, 2006, for example, will include the flow data from Tuesday evening's nominations cycle for flow on Wednesday. In the NGI version of the Hub Flow report, intraday pipeline nominations are excluded to make an apples-to-apples comparison, i.e., only daily evening nominations are compared to provide a correct daily change volume number and a percentage change.
In addition to the gas flow data, NGI also has included its price indexes in the Hub Flow chart, as well as the price spreads between the indexes and the Henry Hub cash index for that flow day and the daily change in that price spread. There is a surprisingly tight correlation between the flow volumes at certain locations -- Transco Zone 6 NY, for example -- and the price spread between the index for that location and the Henry Hub. In some cases, it seems as if gas flows could be used to help predict price or basis direction. In other cases, however, such as Sumas, there appears to be very little correlation.
For more information on the Bentek Hub Flow data, go to Bentek report. For information on Bentek Energy, go to Bentek Energy . The Hub Flows report is one of several new reports being released by Bentek Energy. Others include the Daily Storage Outlook and the Texas Intrastate Pipeline Report.
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