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Overview: Thursday, February 3 (next release 2:00 p.m. on February 10)
Since Wednesday, January 26, natural gas spot price movements have been mixed, increasing at most market locations in the Lower 48 States while decreasing in the Northeast and Louisiana regions. Prices at the Henry Hub fell 6 cents, or about 1 percent, to $6.38 per MMBtu Yesterday (February 2), the price of the NYMEX futures contract for March delivery at the Henry Hub settled at $6.376 per MMBtu, decreasing roughly 5 cents, or about 1 percent, since last Wednesday (January 26). Natural gas in storage was 2,082 Bcf as of January 28, which is about 15 percent above the 5-year average. The spot price for West Texas Intermediate (WTI) crude oil decreased $2.15 per barrel, or about 4 percent, on the week to $46.65 per barrel or $8.043 per MMBtu.
Price changes were mixed since last Wednesday, January 26. At most market locations in Texas, the Rocky Mountains, Midcontinent, Midwest, California, and Arizona regions, prices climbed no more than 5 percent above the level reported last Wednesday, January 26. Meanwhile, prices at most locations in the Northeast and Louisiana regions declined. Declines at most markets in the Louisiana region were less than 3 percent, while prices in the Northeast region declined by more than 51 percent at most locations, reflecting the relatively high recent prices in this region. At the New York citygate, prices fell $15.03 per MMBtu, or 67 percent, since Wednesday, January 26, to average $7.24 per MMBtu on Wednesday, February 2. Similarly, prices at the Algonquin citygate, which serves the New England region, fell $11.44 or about 60 percent. Moderating temperatures along the northern tier of the Lower 48 States contributed to the price declines in the Northeast, however colder-than-normal temperatures in the Southeast region and market expectations of colder temperatures in the coming weeks appear to be providing some support to the price level.
At the NYMEX, the price of the futures contract for March delivery at the Henry Hub decreased about 5 cents per MMBtu since last Wednesday, January 26, to $6.376 per MMBtu. Similarly, prices for the futures contracts for the April 2005 contract decreased about 3 cents during the same period to $6.394 per MMBtu. Futures contract prices for March 2005 and April 2005 are within 2 cents of the Henry Hub spot price, with the price of the March contract price just below the Henry Hub spot price.
Recent Natural Gas Market Data
Working gas in underground storage decreased to 2,082 Bcf as of Friday, January 28, according to EIA’s Weekly Natural Gas Storage Report. Inventories now stand 15.1 percent, or 273 Bcf, above the 5-year average of 1,809 Bcf (See Storage Figure). Despite the relatively cold January weather, inventories are still 188 Bcf, or 9.9 percent, higher than last year’s level of 1,894 Bcf at this time. The implied net withdrawal for the week was 188 Bcf, which is the second largest withdrawal so far this heating season. The withdrawal was higher than the 5-year average withdrawal (182 Bcf), but considerably lower than last year’s withdrawal (225 Bcf) during the report week. During the week ending January 28, the weather for the country as a whole was approximately 6 percent colder than normal, as measured by heating degree days (HDDs) published by the National Weather Service, but about 10 percent warmer than last year. In the East North Central region, which includes Chicago and other Midwest population centers, temperatures were 6 percent colder than normal and about 11 percent warmer than last year. The Middle Atlantic and New England Census Regions both experienced temperatures that were about 32 percent colder than normal, but approximately equal to last year. (See Temperature Map) (See Deviations Map)
Other Market Trends:
DOE Awards Funding for Microhole Technology Projects: On January 31, 2005, the Department of Energy (DOE) announced the award of funding for projects designed to develop “microhole” technology, which is aimed at reducing the costs and environmental impacts of drilling oil and gas wells in the United States. The total value of the 10 projects is almost $14.5 million with DOE awarding $7.7 million and industry partners contributing $6.8 million. The initiative involves developing technologies associated with drilling wells smaller than 4 3/4 inches in diameter and related downhole micro-instrumentation. It is expected that microhole and related micro-instrumentation technologies will cut the producers’ exploration risk to a level that compares to that of drilling development wells. DOE analysis shows that microhole technology has the potential to cut exploratory drilling costs by a third or more and to reduce development drilling costs by more than 50 percent. It is hoped that widespread adoption of microhole technology will lead to a surge in “infill development,” which is drilling wells between existing wells that could tap potentially billions of barrels of bypassed oil at shallow depths in mature producing areas.
Natural gas price trends were mixed, with increases at most market locations outside of the Northeast and Louisiana regions since last Wednesday, January 26. Working gas in storage declined to 2,082 Bcf, which is about 15 percent above the 5-year average.
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