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Overview: Thursday, January 6 (next release 2:00 p.m. on January 13)
Since Wednesday, December 29, natural gas spot prices have decreased at most market locations in the Lower 48 States. For the week (Wednesday-Wednesday), prices at the Henry Hub declined 34 cents, or about 6 percent, to $5.84 per MMBtu. Yesterday (January 5), the price of the NYMEX futures contract for February delivery at the Henry Hub settled at $5.833 per MMBtu, decreasing roughly 57 cents since last Wednesday (December 29). Natural gas in storage was 2,698 Bcf as of December 31, which is about 12 percent above the 5-year average. The spot price for West Texas Intermediate (WTI) crude oil decreased $0.28 per barrel, or less than 1 percent, on the week to $43.41 per barrel or $7.484 per MMBtu.
Moderate temperatures, the holiday-shortened week, falling crude oil prices, and a favorable supply situation led to widespread declines in natural gas spot prices in the Lower 48 States since last Wednesday, December 29. With warmer-than-normal temperatures prevailing throughout most of the Lower 48 States, prices fell more than 40 cents per MMBtu at most market locations through Monday, January 3. However, wintry weather conditions moving into the Lower 48 States sparked a rally in prices on Tuesday, January 4, that reversed many of the price declines, leading to price increases at market locations in the Rocky Mountains, West Texas, and Arizona regions. Since last Wednesday, December 29, price declines were steepest at most locations in Louisiana and in the Northeast region, where prices fell between 25 and 59 cents per MMBtu. Declines at most other market locations in the California, Texas, Midwest, and Midcontinent regions in the same period were somewhat less pronounced. With these declines, prices fell below last year’s levels by about 5 to 10 percent at most market locations. As of January 5, 2004, prices at the Henry Hub were nearly 7 percent below last year’s level, falling below the $6 mark during the week for the first time since the last week of November 2004.
At the NYMEX, the price of the futures contract for February delivery at the Henry Hub decreased about 57 cents per MMBtu since last Wednesday, December 29, to $5.833 per MMBtu. On Monday, January 3, the futures price for the near-month contract fell to $5.790 per MMBtu, its lowest level since September 2004. In addition, the February 2005 contract fell to its lowest level since February 25, 2004. Futures contract prices for February 2005 and March 2005 are within 10 cents of the Henry Hub spot price.
Recent Natural Gas Market Data
Working gas in underground storage decreased to 2,698 Bcf as of Friday, December 31, 2004, according to EIA’s Weekly Natural Gas Storage Report. (See Storage Figure) Inventories now stand at 11.5 percent, or 279 Bcf, above the 5-year average of 2,419 Bcf. The implied 151 Bcf withdrawal reflected a lower drawdown rate than that of the preceding report week. Storage activity during the week ending December 31 was affected by the weather, which for the country as a whole was approximately 17 percent warmer than normal, as measured by heating degree days (HDDs) published by the National Weather Service. A decrease in HDDs was recorded in each region across the United States for the report week, with the exception of New England. (See Temperature Map) (See Deviations Map)
Other Market Trends:
Natural Gas Rig Count: The number of rigs drilling for natural gas decreased by 12 to 1,058 rigs for the week ending December 31, 2004, according to Baker-Hughes Incorporated. Despite the decrease in the number of natural gas rigs during the last week of 2004, the average for the year was 1,025 rigs, which is a record high for the period since 1987 when Baker-Hughes first reported rigs by fuel type. This is an increase of 17.5 percent from the 872 gas rigs in 2003. Since the beginning of May 2004, the natural gas rig count was consistently above 1,000, which is the longest sustained period at such levels. The 34 weeks of 2004 in which gas rigs exceeded 1,000 is more than double the 15-week period for 2001. Rigs drilling for gas accounted for 86 percent of total rigs in 2004, compared with 84.4 percent in 2003.
Natural gas prices declined at most market locations east of the Rockies since last Wednesday, December 29, falling below last year’s levels. Working gas in storage declined to 2,698 Bcf, which is about 12 percent above the 5-year average.
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