for week ending August 11, 2004 | Release date: August 12, 2004 | Previous weeks
Overview:
Thursday, August 12 (next release 2:00 p.m.on June 19)
Natural
gas spot and futures prices moved lower on the week (Wednesday to Wednesday,
August 4-11), as unseasonably cool temperatures prevailed in most high
gas-consuming regions of the nation. At
the Henry Hub, the spot price declined 6 cents on the week, or just over 1
percent, to yesterday's (Wednesday, August 11) level of $5.64 per MMBtu. On the NYMEX, the futures contract for
September delivery edged down nearly 5 cents per MMBtu, or about 1 percent, to
settle yesterday at $5.614. EIA reported
that inventories were 2,452 Bcf as of Friday, August 6, which is 5.0 percent
greater than the average for the previous 5 years (1999-2003). The spot price for West Texas Intermediate
(WTI) crude oil rose sharply in last Thursday's (August 5) trading to top $44
per barrel and stayed above that level for 4 of the 5 trading days in the
week. The WTI spot price ended trading
yesterday at $44.72 per barrel, or $7.71 per MMBtu, which is $1.99 per barrel,
or almost 5 percent, higher than last Wednesday's (August 4) price.
Spot prices continued their downward trend for the
third consecutive week, as cooler-than-normal temperatures lingered throughout
the week in most major gas-consumption centers, suppressing swing demand for
air conditioning load. Despite a warming
trend in the West beginning over the weekend (August 7-8), spot prices at
Futures trading roughly mirrored developments in
spot markets. Two days of storm-related
price increases, coupled with a modest increase last Thursday (August 5), could
not overcome price declines of last Friday (August 6) and yesterday, as the
near-month contract (for September delivery) declined $0.047 per MMBtu on the
week, settling yesterday at $5.614.
Thursday's price increase coincided with the (then) all-time high
near-month crude oil contract settlement price of $44.41 per barrel. The petroleum markets have been unsettled as
the conditions in Iraq and the Russian government's involvement with Russia's
largest oil producer continue to foster uncertainty in world oil supply
prospects. However, despite another
record-setting session in crude futures prices on Tuesday (August 10), natural
gas futures prices generally moved lower on the week. Wednesday's relatively sharp decline seems to
indicate that futures prices are reacting more to the near-term weather
forecasts, which predict the continuing of cool temperatures throughout most of
the nation east of the Rockies until late August. Nonetheless, the current differentials
between the spot price and futures prices for the heating season months, which
ranged from more than $1 to nearly $1.26, continue to provide incentive for
storage injections.
Recent Natural Gas
Market Data
Estimated Average Wellhead |
||||||
|
Nov-03 |
Dec-03 |
Jan-04 |
Feb-04 |
Mar-04 |
Apr-04 |
Price
($ 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:
|
||||||
Source: Energy Information Administration, Office
of Oil and Gas. |
Working
gas inventories stood at 2,452 Bcf as of Friday, August 6, according to the
Energy Information Administration's Weekly
Natural Gas Storage Report released August 12. This is 5.0 percent above the previous 5-year
(1999-2003) average for the week (See
Storage Figure). The implied net injection of 72 Bcf is 18
Bcf, or 33.3 percent, greater than the previous 5-year average. Cooler-than-normal weather, as measured by
cooling degree day (CDD) data published by the National Weather Service (NWS),
in 7 of 9 Census Divisions and for the nation as a whole during the 7-day
period ending Saturday, August 7, dampened demand for natural gas-fired
electricity generation and thereby freed up gas for injection into storage. (See Temperature Map)
(See Deviations Map) According to the latest NWS data, CDDs for
the entire nation were about 12 percent below normal. With more than 12 full weeks remaining until
the end of the traditional refill season (October 31), average weekly net
injections of 44 Bcf would bring stock levels to 3,000 Bcf for the traditional
beginning of the heating season.
Other
Market Trends:
Well
Closures in the Gulf of Mexico Owing To Storm Activity: Tropical Storm Bonnie and the approaching Hurricane
Charley have led a number of major Gulf of Mexico (GOM) producers to evacuate
employees and shut in production. According to the Minerals and Management
Service, as of Wednesday, August 11, the shut-in natural gas and oil production
were equivalent to more than 2 billion cubic feet and 419 thousand barrels per
day, respectively. A total of 108 platforms and 37 rigs have been evacuated.
According to trade reports, the reaction to the storms has varied among the
companies. As of Tuesday, August 10,
Shell Oil Company shut in 80 million cubic feet per day of gas production along
with 49 thousand barrels a day of oil output in its Princess and Crosby fields
in the Gulf. ExxonMobil evacuated an unknown number of nonessential workers,
while shutting in 27 million cubic feet per day of gas and 3 thousand barrels
per day of oil production. Marathon removed about 12 nonessential workers from
the GOM and shut in 90 million cubic feet per day of gas and 2 thousand barrels
per day of oil. Other companies had removed some personnel and shut in little
or none of their Gulf production by Tuesday.
The entire Gulf produces about 12 billion cubic feet per day of gas and 1.6
million barrels per day of oil.
Bureau of Land Management (BLM)
Clarifies Policy on Issuing Leases: The
BLM released on July 27, 2004, an Instruction Memorandum (IM) to clarify
policies and procedures for State Offices when issuing competitive and
noncompetitive leases and when approving assignments of record title or
approving transfers of operating rights when entities are in violation of the
Mineral Leasing Act (MLA). The MLA
requires that no individual, association, or corporation shall take hold, own,
or control more than 246,080 acres of public land or acquired lands from a
Federal lease in any one state at any one time, with the exception of Alaska,
where limits are 300,000 acres in the northern and southern districts. In certain circumstances that cause an entity
to exceed the acreage limit, the entity may have a maximum of 180 days to
comply. The period may be extended by a
State Director if the entity files a petition providing sufficient
justification. Any entity that exceeds
the acreage limitation shall not be allowed to acquire additional lease acreage
until it has complied with the acreage limitation. This restriction on acquiring new leases or
lease interests applies even if the entity is operating within the divestiture
period, which may extend up to 180 days.
During the first two weeks in January, each state (except Alaska) is
required to perform an annual acreage review.
Any review reporting an entity with chargeable acreage exceeding 200,000
acres will cause that entity to be subjected to a full audit of its oil and gas
lease interest holdings for that type of land in that geographic area.
Summary:
Spot prices declined for the third consecutive week,
and futures prices also declined, as cooler-than-normal temperatures continued
to dominate most of the nation east of the Rockies, more than offsetting the
impact through Wednesday of consecutive tropical storms in the eastern Gulf of
Mexico. Storage injections continued to
exceed the 5-year average by significant amounts, and total stocks reached 5
percent above the 5-year average.