Overview:  Thursday, July 22 (next release 2:00 p.m. on July 29)

Since Wednesday, July 14, natural gas spot prices have increased at virtually all market locations in the Lower 48 States.  For the week (Wednesday-Wednesday), prices at the Henry Hub remained at $5.91 per MMBtu.  Yesterday (July 21), the price of the NYMEX futures contract for August delivery at the Henry Hub settled at $5.931 per MMBtu, decreasing roughly 5 cents or less than 1 percent since last Wednesday (July 14).  Natural gas in storage was at 2,227 Bcf as of July 16, which is 2.6 percent above the 5-year average.  The spot price for West Texas Intermediate (WTI) crude oil fell 35 cents per barrel or less than 1 percent on the week to $40.63 per barrel or $7.005 per MMBtu.

 

 

 

Prices:

Strengthening weather fundamentals and increasing power generation loads since Monday, July 19, contributed to rebounding gas prices at most market locations in the Lower 48 States.  The growing potential for a supply-side disturbance also contributed to rising prices on Wednesday, July 21, as the first tropical depression of the Atlantic hurricane season may be gathering south of Hispaniola.  The largest gains in spot prices since last Wednesday, July 14, principally occurred west of the Rockies as increases in the California and Rocky Mountains regions averaged 21 and 19 cents per MMBtu, respectively.  Prices in the Northeast gained 11 cents per MMBtu on average with prices at the Algonquin and New York City citygates climbing 19 and 17 cents per MMBtu, respectively.  Gains elsewhere were less pronounced with prices in the Midcontinent, Midwest, and Texas regions increasing less than a dime on average.   In contrast to the general pattern of rising prices in the Lower 48 States, prices in Florida fell on average 8 cents per MMBtu.  Prices continue to exceed last year’s levels by almost a dollar.  As of July 21, 2004, prices at the Henry Hub are 90 cents or 17 percent above last year’s level.

 

 

At the NYMEX, the price of the futures contract for August delivery at the Henry Hub decreased about 5 cents per MMBtu or nearly 1 percent since last Wednesday to $5.931 per MMBtu.  Similarly, the prices of the futures contracts for delivery in each of the remaining 5 months of 2004 fell less than a nickel from last Wednesday’s levels.  Since falling below the $6.00 per MMBtu mark on July 12, the August contract has varied in a range of about $5.82 to $5.98 per MMBtu.  Futures contract prices for each month through the remaining months of 2004 and January 2005 exceed the Henry Hub spot price by 2 to 91 cents per MMBtu with each successive month larger than the preceding month.  The January 2005 contract traded at a 91-cent premium to the Henry Hub spot price yesterday (July 21).  With the futures strip through next winter trading at a significant premium to the Henry Hub spot price, economic incentives to inject gas into storage remain significant.   However, the tightening of the basis differential of the August and September contracts at 2 and 6 cents, respectively, may reflect expected increasing cooling demand for natural gas, which likely will compete with injection demand for natural gas during the warmest days of summer.  

.

 

 

Recent Natural Gas Market Data

 

Estimated Average Wellhead Prices
	Nov-03	Dec-03	Jan-04	Feb-04	Mar-04	Apr-04
Price ($ per Mcf)	4.34	5.08	5.53	5.15	4.97	5.20
Price ($ per MMBtu)	4.22	4.94	5.38	5.01	4.83	5.06
Note:  The price data in this table are a pre-release of the average wellhead price that will be published in forthcoming issues of the Natural Gas Monthly.  Prices were converted from $ per Mcf to $ per MMBtu using an average heat content of 1,027 Btu per cubic foot as published in Table A4 of the Annual Energy Review 2002.
Source:  Energy Information Administration, Office of Oil and Gas.

 

Storage:

Working gas in storage was 2,227 Bcf as of Friday, July 16, 2004, according to the EIA Weekly Natural Gas Storage Report.  This is 57 Bcf, or about 2.6 percent, above the 5-year average for the report week. (See Storage Figure)  The implied net injection during the report week was 72 Bcf, which is about 4 percent above the 5-year average net addition of 69 Bcf for the week and 5 Bcf below the injection of 77 Bcf reported for the same week last year.  Cooling degree days were about 23 percent below normal on average in the Lower 48 States during the week ended July 17.  The relatively mild temperatures east of the Rockies likely contributed to the above-average injections. (See Temperature Map) (See Deviations Map)

 

Other Market Trends:

Final Lease Sale 192 in the Western Planning Area:  The Minerals Management (MMS) published a Federal Resister notice concerning Lease Sale 192 for offshore oil and gas in the Western Planning Area of the Gulf of Mexico.  According to the MMS, it is possible that this sale will increase annual oil production by 126 millions barrels from its previous 136 million barrels and increase natural gas by 0.63 trillion cubic feet from its previous 0.81 trillion cubic feet.  The sale area surrounds 3,907 blocks on 21.2 million acres of Federal land, which is located about 9 to 210 miles offshore Texas and Louisiana and in water depths of 4 to more than 3,425 meters (13 to 11,303 feet).  The final notice includes changes that were not included in the proposed notice published in March 2004.   These changes include changes to the new deepwater royalty suspension provisions and an increase in the bonus bid of $12.50 from $25 for tracts in water depths of 400-799 meters.

 

LNG Second-Quarter Imports: U.S. liquefied natural gas (LNG) imports rose by 26 percent in the second quarter compared to the same period last year, according to Natural Gas Week. Second-quarter imports increased by 6 percent compared to the first quarter, as disruptions in supply from Trinidad and Tobago were more than offset by increased imports from Algeria, Nigeria, Qatar, and Oman.  The Trinidad and Tobago outages affected the Everett, Massachusetts, LNG facility the most, as the inflow decreased by about 6 Bcf for the quarter. Imports at the Lake Charles, Louisiana, LNG terminal increased almost 28 percent compared to the first quarter of 2004, however, it was still below its peak capacity of 1 Bcf/d. The Cove Point, Maryland terminal remained the largest LNG importer in the United States as imports remained stable between the first and second quarters of 2004.  The decrease in Lake Charles’ imports relative to the same period last year is partly a result of the shift in cargoes from Trinidad and Tobago to Elba Island, Georgia.

 

Summary:

Spot prices rebounded with increases at most market locations outside of Louisiana, Florida, and South Texas.  Prices for the near-term NYMEX futures contract decreased less than 1 percent from last week’s level.  Working gas in storage increased to 2,227 Bcf, which is nearly 3 percent above the 5-year average.  

 

Natural Gas Summary from the Short-Term Energy Outlook