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Natural Gas Weekly Update Archive

for week ending September 15, 2004  |  Release date:  September 16, 2004   |  Previous weeks

Overview: Thursday, September 16 (next release 2:00 p.m. on September 23)

Natural gas spot and futures price movements were mixed for the week, as Hurricane Ivan pushed prices upward in Gulf of Mexico production areas and in consuming markets east of the Mississippi, but had little effect on prices elsewhere. Likewise, on the NYMEX, the price for the near-month contract (for October delivery) got a significant, brief boost from Ivan, while the November contract price was nearly flat for the week and out-month contracts fell in price. At yesterday's price of $5.16 per MMBtu, the Henry Hub spot price reflected a gain of 47 cents or 10 percent on the week. The October futures contract price increased $0.193 per MMBtu, or about 4 percent, on the week to settle yesterday at $4.824. EIA reported that inventories were 2,874 Bcf as of Friday, September 11, which is 7.5 percent greater than the 5-year (1999-2003) average. The spot price for West Texas Intermediate crude oil moved up $1.16 per barrel ($0.18 per MMBtu) from the previous Wednesday's (September 8) level, to trade yesterday at $43.83 per barrel, or $7.56 per MMBtu.



The twists and turns of Hurricane Ivan dominated natural gas markets for the week, as this major storm bore down on production facilities in the Gulf of Mexico, causing the shut-in of about 50 percent of natural gas production from the Gulf. (See "Other Market Trends" below for details.) Ivan's major impact on prices occurred on Monday, September 13, as prices rose sharply at all market locations, with increases ranging from 20 to 60 cents per MMBtu. While prices at most Louisiana and Gulf Coast points continued to rise through yesterday, prices elsewhere resumed their generally downward trend of the past 8 weeks. In addition, the current negative price spread between the NYMEX futures contract for October delivery and the Henry Hub spot price provides an incentive for withdrawals from storage, further dampening demand for spot-market gas. Nevertheless, Ivan left cash prices higher than levels the previous week at nearly all locations east of the Rockies for the first time since July 14-21. Prices for delivery to Florida markets showed the sharpest week-on-week increases, as prices at the Florida Gas Transmission citygate and in Florida Gas Zones 2 and 3 rose by $1.12, $1.06, and $1.43 per MMBtu, respectively. Florida Gas Zone 3 recorded the nation's highest price yesterday at $6.24 per MMBtu. Average prices in the Louisiana, Alabama/Mississippi, and Northeast regions moved above $5 per MMBtu, with a weekly average increase of 57 cents in the Louisiana and Alabama/Mississippi regions, and 29 cents in the Northeast. Regional averages in South and East Texas increased by 32 and 28 cents, respectively, to $4.93 and $4.89 per MMBtu. By contrast, spot prices at Arizona/Nevada and California locations fell on the week by about 10 to 15 cents per MMBtu, leaving the PG&E citygate price at $4.83 per MMBtu, while the Southern California Border Average price averaged $4.62 in yesterday's trading.



On the NYMEX, Hurricane Ivan's influence was limited to the October futures contract, which recorded a one-day gain of nearly 30 cents on Monday (September 13) on its way to an increase of $0.193 on the week, to yesterday's settlement price of $4.824 per MMBtu. Prices for contracts for delivery in the heating season months of December 2004 through March 2005 fell on Tuesday and Wednesday, ending the week with declines of around 3 to 4 cents per MMBtu. The spread between the prices of heating-season-month contracts and the near-month contract has declined significantly over the past two weeks, but still exceeds $1 per MMBtu for December through March. As of yesterday, the highest-priced gas for delivery during the upcoming heating season was for the month of February, at $6.558 per MMBtu.


Recent Natural Gas Market Data


Estimated Average Wellhead Prices








Price ($ per Mcf)







Price ($ per MMBtu)







Note: 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.



Working gas inventories increased by 99 Bcf to 2,874 Bcf as of Friday, September 10, according to EIA's Weekly Natural Gas Storage Report. This is 7.5 percent above the previous 5-year (1999-2003) average level for this point in the year (See Storage Figure). The net addition of 99 Bcf is 18 Bcf, or about 22 percent, greater than the 5-year average for the week, but 2 Bcf less than last year's addition. Net additions in the West region were the strongest relatively speaking, exceeding last year's additions by one-third and the 5-year average by over 70 percent. This caused West region inventories to grow by 1.6 percentage points on the week to 7.8 percent above the 5-year average. With the exception of some significant heat in parts of California and the sparsely-populated desert Southwest, temperatures across the nation during the week covered by this storage report have been moderate (See Temperature Map). Despite some deviations from normal temperatures in various areas of the nation (See Deviations Map), at this time of year these deviations are seldom sufficient to generate either significant heating or cooling load. Consequently, more gas is available for injection into storage.



Other Market Trends:

Well Closures in the Gulf of Mexico Owing To Storm Activity: The Category 4 Hurricane Ivan has 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, September 15, the shut-in natural gas and oil production in the Federal offshore Gulf were equivalent to more than 6 billion cubic feet and 1.3 million barrels per day, respectively. A total of 575 platforms and 69 rigs have been evacuated. According to trade reports, the reaction to the storm has varied among the companies. As of Tuesday, September 14, Shell Oil Company had shut in 1.3 billion cubic feet per day of gas production along with 444 thousand barrels per day of oil output in its Enchilada, Auger, Bullwinkle, Brutus, and Popeye fields in the central Gulf. ExxonMobil had evacuated 240 contractors and employees, while shutting in 240 million cubic feet per day of gas and 35 thousand barrels per day of oil production. ChevronTexaco reported evacuating 1,100 of its 1,600 employees in the Gulf and shutting in an estimated 60 to 70 percent of its Gulf production. Other companies also removed personnel and shut in some of their Gulf production by Wednesday. The Federal offshore waters in the Gulf produce about 12 billion cubic feet per day of gas and 1.6 million barrels per day of oil.


EIA Publishes Annual Energy Review 2003: The Energy Information Administration released the Annual Energy Review 2003 on September 9, 2004. This report provides historical statistics for all major forms of energy, such as natural gas, petroleum, coal, electricity, nuclear energy, and renewable energy. Data are presented for total energy production, consumption, foreign trade, and energy prices. For many series, data begin with the year 1949. Also included are financial indicators related to domestic energy, international energy, environmental indicators, and data unit conversions. The fossil fuel data in this report show the dramatic expansion of the use of fossil fuels, which increased almost three-fold from 29 quadrillion British thermal units (Btu) in 1949 to 84 quadrillion Btu in 2003. Fossil fuels have accounted for 86 percent of all energy consumed in the United States in recent years.



Hurricane Ivan prompted significant increases in spot prices east of the Rockies and in the price of the October futures contract, while spot prices elsewhere, as well as futures-contract prices for December and beyond, declined. Net additions to storage once again exceeded the 5-year average, bringing stocks to a level 7.5 percent greater than the 5-year average.


Short-Term Energy Outlook