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
$6.558 per MMBtu.
Recent Natural Gas
Market Data
|
Estimated Average Wellhead Prices |
||||||
|
|
Mar-04 |
Apr-04 |
May-04 |
Jun-04 |
Jul-04 |
Aug-04 |
|
Price ($ per Mcf) |
4.97 |
5.20 |
5.63 |
5.85 |
5.60 |
5.36 |
|
Price ($ per MMBtu) |
4.83 |
5.06 |
5.48 |
5.69 |
5.45 |
5.21 |
|
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.
Summary:
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.
