for week ending September 29, 2004 | Release date: September 30, 2004 | Previous weeks
Overview:
Thursday, September 30 (next release 2:00 p.m. on October 7)
Since
Wednesday, September 22, natural gas spot prices have increased at virtually
all market locations in the Lower 48 States, owing to the effects of Hurricane
Ivan, climbing crude oil prices, and market expectations of an early arrival of
winter. For the week
(Wednesday-Wednesday), prices at the Henry Hub increased 64 cents, or about 11
percent, to $6.23 per MMBtu. Yesterday (September 29), the price of the
NYMEX futures contract for November delivery at the Henry Hub settled at $6.911
per MMBtu, increasing roughly 67 cents or about 11
percent since last Wednesday (September 22).
Natural gas in storage was 3,011 Bcf as of
September 24, which is 7 percent above the 5-year average. The spot price for West Texas Intermediate
(WTI) crude oil increased $1.12 per barrel, or about 2 percent, on the week to
$49.53 per barrel or $8.54 per MMBtu.
Natural
gas prices continued to surge in the wake of Hurricane Ivan for the second week
in a row. The persistence of shut-ins
and greater-than-expected damage to natural gas infrastructure owing to
Hurricane Ivan impeded restoring gas production in the Gulf of Mexico. According to the Minerals Management Service
(MMS), shut-ins remained at 2.3 Bcf per day as of
Wednesday, September 29, down from 2.4 Bcf per day
last Wednesday, September 22. Some
analysts speculate that it could take up to 2 months to restore production in
the Gulf of Mexico to its former levels, contributing to the higher level of
prices. Climbing crude oil prices and
weather forecasts released since last Wednesday, September 22, also may have
contributed to the run-up in natural gas prices. Natural gas spot price increases since last
Wednesday were widespread, ranging between 25 and 76
cents per MMBtu or about 5 to 13 percent at most
market locations. Prices at the Henry
Hub climbed 64 cents or about 11 percent for the week. Increases exceeding 50 cents per MMBtu occurred at market locations in Texas, Louisiana, the
Midcontinent, and the Northeast regions. The largest price increase in the Lower 48
States occurred at the Florida Gas Zone 2 where prices climbed $1.35 per MMBtu since September 22 to $7.04 per MMBtu,
an increase of nearly 24 percent. Since
Hurricane Ivan first posed a threat to the producing region in the Gulf of
Mexico, prices rose from being slightly below last year's levels at most market
locations to exceeding last year's levels by 20 to 40 percent.
At
the NYMEX, the price of the futures contract for November delivery at the Henry
Hub increased about 67 cents per MMBtu or nearly 11
percent since last Wednesday, September 22, to $6.911 per MMBtu.
This is the highest settlement price for the November 2004 futures contract
since May 27, 2004. The futures
contracts for delivery during the heating season months exhibited a similar
upward trend, as prices climbed between 11 and 12 percent. While the November 2004 contract is currently
trading at a premium of about 68 cents per MMBtu to
the Henry Hub spot price, futures contract prices for each month from December
2004 through March 2005 exceed the Henry Hub spot price by at least $0.65 to
about $1.63 per MMBtu. 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. The futures contract for October delivery
closed on Tuesday, September 28, at $5.723 per MMBtu,
increasing about 65 cents per MMBtu or 13 percent
since August 31.
Recent Natural Gas
Market Data
Estimated Average Wellhead Prices |
||||||
|
Mar-04 |
Apr-04 |
May-04 |
Jun-04 |
Jul-04 |
Aug-04 |
Price ($ 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 3,011 Bcf as of Friday, September
24, 2004, according to the EIA Weekly Natural Gas Storage Report. This is 183 Bcf, or
about 6.5 percent, higher than the 5-year average for the report week. (See Storage Figure) At 3,011 Bcf,
working gas stocks are at their second-highest level for the report week in the
11-year history of the weekly natural gas storage database. The implied net injection during the report
week was 69 Bcf, which is about 7 percent below the
5-year average net addition of 74 Bcf for the week
and 32 Bcf less than the injection of 101 Bcf reported for the same week last year. This is the second week in a row that net
additions to storage have been 32 Bcf below last
year's level of injections. Cooling
degree days were about 12 percent above average in the Lower 48 States during
the week ended September 25. (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 24, the cumulative shut-in total reached more
than 43 Bcf, increasing about 20 Bcf
since the preceding Friday (September 17).
Other
Market Trends:
Update on Impacts of Hurricane Ivan: As of September 29, the U.S. Minerals Management
Service (MMS) reported that 2.3 billion cubic feet per day of natural gas and
485 thousand barrels per day of oil production in the Federal offshore areas of
the Gulf of Mexico remain shut in. The current level of shut-ins is well below
the peak of 6.5 billion cubic feet per day of gas and 1.3 million barrels per
day of oil. The 2.3 billion cubic feet per day level has remained stable since
Wednesday, September 22. The current amount of shut-in gas and oil production is
equivalent to 19 percent and 29 percent of daily Federal offshore Gulf
production, respectively. The cumulative (9/13/04-9/28/04) shut-in gas
production is estimated at 55.5 billion cubic feet, while the cumulative
shut-in oil production is estimated at about 12.4 million barrels. MMS reported
that a total of 39 platforms were still evacuated as of September 29, which is
down significantly from the high of 545 platforms. Shut-in production rates do
not include production lost as a result of the destroyed platforms.
EIA
Releases Report on U.S. Natural Gas Pipeline and Storage Expansions: The Energy Information Administration (EIA) has
published a report, U.S.
Natural Gas Pipeline and Underground Storage Expansions in 2003, that examines natural gas pipeline and underground
storage expansions in 2003. It also includes a discussion and comparative
analysis of the recent level of growth in the two areas, as well as an
examination of the amount of additional development proposed for completion
over the next several years. Pipeline transportation and underground storage
are crucial components of the U.S. natural gas system: the pipelines provide a link
between production areas and the market place, while the underground storage
facilities ensure the system's capability to transport gas without interruption
during high demand periods. According to the report, both natural gas pipeline
and underground storage development decreased in 2003 compared with the 2002
levels, marking a 19 percent decrease in pipeline capacity additions and a 27
percent decrease in underground storage working gas capacity additions. In
2003, new and expanded underground gas storage fields added 18.6 Bcf of working gas capacity with daily peak withdrawal
capability increasing by 2.0 Bcf per day, compared
with an increase of 26 Bcf and 2.5 Bcf per day, respectively, in 2002. New pipeline
development and expansions added about 2,200 miles of pipeline and 10.4 Bcf per day of natural gas pipeline capacity in 2003.
However, the current inventory of new pipeline capacity expansion projects
point to another drop of pipeline additions in 2004. At least 49 natural gas
pipeline projects and 9 storage projects were completed during 2003.
Summary:
Natural
gas prices increased across the board since last Wednesday, September 22, as
the recovery of natural gas production in the Gulf of Mexico in the aftermath
of Hurricane Ivan continues. Working gas in storage increased to 3,011 Bcf, which is about 7 percent above the 5-year average.