for week ending September 22, 2004 | Release date: September 23, 2004 | Previous weeks
Overview:
Thursday, September 23 (next release 2:00 p.m. on September 30)
Since
Wednesday, September 15, natural gas spot prices have increased at virtually
all market locations in the Lower 48 States, owing to the effects of Hurricane
Ivan. For the week
(Wednesday-Wednesday), prices at the Henry Hub increased 43 cents, or about 8
percent, to $5.59 per MMBtu. Yesterday (September 22), the price of the
NYMEX futures contract for October delivery at the Henry Hub settled at $5.629
per MMBtu, increasing roughly 81 cents or about 17
percent since last Wednesday (September 15).
Natural gas in storage was 2,942 Bcf as of
September 17, which is 7 percent above the 5-year average. The spot price for West Texas Intermediate
(WTI) crude oil increased $4.58 per barrel, or about 10 percent, on the week to
$48.41 per barrel or $8.347 per MMBtu.
Natural
gas prices surged in the wake of Hurricane Ivan, as shut-ins and
greater-than-expected damage to natural gas infrastructure significantly
reduced gas production in the Gulf of Mexico.
Natural gas price increases since last Wednesday, September 15, were widespread, ranging between 25 and 70 cents per MMBtu or about 5 to 16 percent at virtually all market
locations. Prices at the Henry Hub
climbed 43 cents or about 8 percent since last Wednesday, September 15. Similarly, prices at selected points in the
California, Rocky Mountains, Midwest, Texas, and Northeast regions climbed more
than 60 cents in the past week. At their
peak on Thursday, September 16, production shut-ins in the Federal offshore
Gulf of Mexico producing region reached 6.5 Bcf per
day (See Other Market Trends).
Continuing difficult weather conditions are impeding efforts to assess
the storm damage to natural gas infrastructure in the region, and some analysts
speculate that it could take up to 2 months to restore production in the Gulf
of Mexico to its former levels. This
lingering uncertainty about the extent of the damage and the possibility that
remnants of Ivan could reconstitute itself as a tropical depression or a
tropical storm in the Gulf of Mexico appear to have contributed to the
sustained higher level of natural gas prices reported Wednesday, September 22. (As of Thursday, September 23, Ivan has been
upgraded to tropical storm status.)
Since Hurricane Ivan first posed a threat to the region, prices rose
from being slightly below last year's levels at most market locations to
exceeding last year's levels by 10 to 25 percent at most market locations. As of September 22, 2004, prices at the Henry
Hub were about 24 percent above last year's level.
At the NYMEX, the price of the futures contract for
October delivery at the Henry Hub increased about 81 cents per MMBtu or nearly 17 percent since last Wednesday, September
15, to $5.629 per MMBtu. This is the highest
settlement price for the October futures contract since August 20, 2004. The futures contracts for delivery during the
heating season months exhibited a similar pattern of rising prices, as prices
climbed between 6 and 12 percent. While
the October 2004 contract is currently trading at a premium of about 4 cents
per MMBtu to the Henry Hub spot price, futures
contract prices for each month from November 2004 through March 2005 exceed the
Henry Hub spot price by at least $0.65 to about $1.25 per MMBtu
with differences growing in each successive month through March 2005. With the futures strip through next winter
trading at a significant premium to the Henry Hub spot price, economic
incentives to inject gas into storage remain strong.
Recent Natural Gas
Market Data
Estimated Average Wellhead Prices |
||||||
|
Mar-04 |
Apr-04 |
May-04 |
Jun-04 |
Jul-04 |
Aug-04 |
Price ($ 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 in storage was 2,942 Bcf as of Friday, September
17, 2004, according to the EIA Weekly Natural Gas Storage Report. This is 188 Bcf, or
about 6.8 percent, higher than the 5-year average for the report week (See Storage
Figure).
The implied net injection during the report week was 68 Bcf, which is about 17 percent below the 5-year average net
addition of 82 Bcf for the week and 32 Bcf less than the injection of 100 Bcf
reported for the same week last year.
Cooling degree days were about 31 percent above average in the Lower 48
States during the week ended September 18. However during the shoulder season,
moderate temperatures still prevail even with such large relative differences (See Temperature Map)
(See Deviations Map). The production shut-ins owing to Hurricane
Ivan were likely the principal factor that contributed to the below average
level of net additions to natural gas storage.
As of Friday, September 17, the cumulative shut-in total reached nearly
23 Bcf.
Other
Market Trends:
Update
on Impacts of Hurricane Ivan: The
damage to oil and gas infrastructure in the Gulf of Mexico is still being
evaluated as the industry tries to return to a normal level of production.
Current reports show that few of the 4,000 platforms and 117 rigs operating in
the Gulf sustained major damage. Most of the 25,000 to 30,000 workers involved
in the production of offshore oil and natural gas are back at work. As of
Wednesday, September 22, U.S. Minerals Management Service (MMS) reported that 2.4
billion cubic feet (Bcf) per day of natural gas and
578 thousand barrels of oil per day still remain shut in. (However, MMS did not
include in these estimates the volumes lost owing to the destroyed rigs and
platforms.) According to MMS, preliminary damage assessments reported by the
industry as of Tuesday include 7 destroyed fixed platforms, 5 adrift Mobile Offshore Drilling Units (MODU), 4 platforms
with extensive damage, and 13 pipeline leaks. While the shut-in volumes of gas
and oil represent about 19 percent and 34 percent of daily GOM production,
respectively, the volumes shut in have been significantly reduced since last
Thursday, September 16, when 545 platforms and 69 rigs were evacuated and 6.5 Bcf of gas was shut in. The cumulative (9/13/04-9/22/04)
shut-in production is 38.6 Bcf of gas and slightly
more than 9 million barrels of oil.
EIA
Releases an Advance Summary of Its 2003 Report on Crude Oil, Natural Gas and
Natural Gas Liquids Reserves: The
Energy Information Administration (EIA) released the Advance
Summary: U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Reserves 2003 Annual Report on September
22, 2004. The report presents key data tables on domestic proved reserves and
some highlights of petroleum industry activity that affected oil and natural
gas production and proved reserves in 2003. According to the report, proved
natural gas reserves were up by 1 percent in 2003, continuing the 5-year trend
of increasing natural gas reserves. While U.S. gas production remained about
the same in 2003, reserves additions replaced 111 percent of 2003 gas
production. Production declines in the Gulf of Mexico and New Mexico were offset
by increases in the Rocky Mountain States and Texas. The Rocky Mountain States
and Texas added large gas reserves in 2003, driven by continuing development of
unconventional gas fields, such as fields developed in tight sands, shales, and coal beds. Coalbed
methane reserves increased 1 percent from 18,491 billion cubic feet (Bcf) in 2002 to 18,743 (Bcf) in
2003, and accounted for 10 percent of U.S. dry gas proved reserves. Crude oil proved reserves declined by 3
percent, marking the first decline in 5 years, as operators replaced only 58
percent of oil production with reserves additions. The full report (to be
published in November 2004) will contain more comprehensive data.
Summary:
Natural
gas prices increased across the board since last Wednesday, September 15, as
Hurricane Ivan significantly reduced natural gas production in the Gulf of
Mexico. Working gas in storage increased
to 2,942 Bcf, which is about 7 percent above the
5-year average.