for week ending April 13, 2005 | Release date: April 14, 2005 | Previous weeks
Overview:
Thursday, April 14 (next release 2:00 p.m. on April 21)
The
emergence of more spring-like temperatures in most regions of the country,
ample natural gas storage supplies, and lower oil prices resulted in natural
gas spot prices easing 7 to 43 cents per MMBtu in the
Lower 48 States since Wednesday, April 6. On the week (Wednesday-Wednesday,
April 6-13), the Henry Hub spot price dropped 39 cents per MMBtu,
or about 5 percent, to $7.07. At the New York Mercantile Exchange (NYMEX), the
futures contract for May delivery fell 58 cents per MMBtu
on the week to a daily settlement of $6.978 yesterday (April 13), the first
close below $7 for a near-month contract since March 28. A second week of net
injections brought natural gas storage supplies to 1,293 Bcf
as of Friday, April 8, which is 26.3 percent above the 5-year average inventory
for the report week. The spot price for West Texas Intermediate (WTI) crude oil
decreased $5.67 per barrel on the week to $50.21 per barrel, or $8.66 per MMBtu.
Moderate
temperatures, especially in key space-heating markets in the Midwest and
Northeast, left prices lower than the previous week at market locations across
the Lower 48 States. For the week, prices at production-area trading locations
along the Gulf Coast generally dropped in three of the five trading sessions
for a total net weekly decrease of between 30-43 cents per MMBtu.
The Henry Hub spot price fell to $7.07 per MMBtu,
which is 39 cents lower than last Wednesday and the lowest spot price at that
trading location in over two weeks. Although a chill briefly entered the
Northeast, prices in the region fell from last week's levels of more than $8
per MMBtu at several key market locations. The price
at New York citygates off Transcontinental Gas Pipe
Line dropped 41 cents per MMBtu on the week to $7.65.
Prices in the Midcontinent production region on
average fell 29 cents per MMBtu, dropping below the
$7-mark at some locations, reflecting the impact of diminished space heating
demand in the region. In contrast to the East, the weather in the Rockies was
considerably colder than average during the week with near blizzard-like
conditions in Colorado. Price declines on the week in the western half of the
country were generally less than those in the East. The spot price at the Opal,
Wyoming, trading location fell 13 cents per MMBtu to $6.46. An outage at the Transwestern
Pipeline interconnection with Southern California Gas during the week appeared
to have little impact on production prices for delivery on the pipeline. The
price off Transwestern in West Texas dropped 21 cents
per MMBtu on the week to $6.38.
At the NYMEX, the May 2005 contract lost 58 cents
per MMBtu on the week, settling at $6.978 yesterday.
As was the case with spot prices, the near-month contract price fell most days
this week amid shoulder-season market conditions and falling prices for oil. At
$6.978 per MMBtu, the May contract is priced 34.5
cents lower than the expiration price of the April 2005 contract. However, the
price for the May-delivery contract remains $1.04 per MMBtu,
or 17 percent, higher than the May 2004 contract's expiration price of $5.935
per MMBtu. While NYMEX contract prices for next
winter (December 2005-February 2006) fell an average
of 46 cents per MMBtu, each contract is still priced
over $8.00 per MMBtu. The 12-month strip, or the
average price for contracts over the next year, settled yesterday at about
$7.56 per MMBtu, a decline of 51 cents on the week.
Recent
Natural Gas Market Data
Estimated Average Wellhead Prices |
||||||
|
Oct-04 |
Nov-04 |
Dec-04 |
Jan-05 |
Feb-05 |
Mar-05 |
Price
($ per Mcf) |
5.45 |
6.07 |
6.25 |
5.52 |
5.59 |
5.98 |
Price
($ per MMBtu) |
5.30 |
5.91 |
6.08 |
5.37 |
5.44 |
5.82 |
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. |
Estimated
working gas in underground storage was 1,293 Bcf as
of April 8, which is 26.3 percent above the 5-year average inventory level for
the report week, according to EIA's Weekly Natural
Gas Storage Report (See Storage Figure). The implied net change in inventories was an addition
of 44 Bcf, which is the second net injection this
spring. This week's implied net injection is significantly larger than the
5-year average injection of 1 Bcf and the injection
of 16 Bcf for the same week last year. The seasonably
mild temperatures throughout the country generated little weather-sensitive
demand, allowing for the relatively large injection. For the week ended April
7, 2005, the weather for the country as a whole was about 30 percent warmer
than normal and over 27 percent warmer than last year, as measured by the
National Weather Service heating degree days (HDD). Temperatures in major consuming market areas
in the Midwest, Northeast and Middle Atlantic were generally mild. The East
North Central Census region, which includes Chicago, recorded 37 percent
warmer-than-normal temperatures, while the temperature in the Mid-Atlantic
Census region was about 28 percent warmer than normal for the week. (See HDD table)
Other
Market Trends:
Natural Gas Rig Count: The number of
rigs drilling for natural gas hit a new record of 1,157 on April 1, 2005, and
remained the same for the week ending April 8, 2005, according to Baker-Hughes
Incorporated. Prior to the upward trend in gas rigs drilling that started in
late 2002, the previous record was set in the week ending July 13, 2001, when
the number of rigs reached 1,068. The
current number of rigs drilling for natural gas exceeds the previous record by
89, and it is 17 percent higher than the number of rigs drilling for natural
gas last year at this time. Rigs
drilling for natural gas have comprised more than 87 percent of the rigs
drilling for both natural gas and oil for the past two weeks. Although the
natural gas share of oil and gas drilling rigs has been at least 85 percent
since the end of May 2003, this is the largest share of rigs drilling for
natural gas in history.
Annual Report for Energy in
Canada in 2004 Released: The National Energy Board (NEB) has released
its 2004 Annual Report describing energy trends in Canada. According to the NEB, the tight balance
between natural gas supply and demand in North America resulted in higher
natural gas prices than in recent years, which in turn encouraged high levels
of drilling in Canada. The report said
that 15,674 gas wells were drilled last year, which set a new record for the
second consecutive year. Gas well completions made up 72 percent of all wells
completed. Despite the increased
drilling, however, gas production in Canada last year was relatively flat,
growing only 0.5 percent over 2003. A
continuing trend of lower initial productivity exhibited by new wells meant
that production was only slightly changed from 2003 levels. The
slight increase in production and a moderate decrease in weather-sensitive gas
demand in Canada resulted in greater gas exports from Canada, which were
primarily used to meet increased gas consumption for U.S. industrial and
electric power generation according to the NEB.
The NEB also reported relatively low returns
to drilling in terms of reserves added.
Reserves replacement in Canada accounted for 46 percent of gas
production in 2004, whereas cumulative additions of marketable gas reserves
over the past 5 years replaced 83 percent of total gas production. Regionally, Alberta accounted for 79
percent of total Canadian gas production, while British Columbia totaled 14
percent; Saskatchewan, 4 percent; Nova Scotia, 2 percent; Northwest Territories
and Yukon, 0.5 percent; and Ontario, less than 0.5 percent.
Summary:
Natural gas spot prices decreased 7-43 cents per MMBtu since Wednesday, April 6, as temperatures moderated
and crude oil prices dropped by more than 10 percent. At the NYMEX, price
decreases were more pronounced, with the price of the near-month contract
dropping 58 cents per MMBtu to below $8. As of April
8, working gas in storage was 1,293 Bcf, which is 23.5 percent greater than last year and 26.3 more than
the 5-year average. Yet prices in both the spot and futures markets remain well
above last year's levels at this time.