Natural Gas

Overview: Thursday, April 28 (next release 2:00 p.m. on May 5)

Since Wednesday, April 20, natural gas spot prices have remained relatively unchanged, increasing less than 12 cents per MMBtu at most market locations in the Lower 48 States, while declining less than 12 cents in the Northeast region. For the week (Wednesday–Wednesday), prices at the Henry Hub were virtually unchanged, climbing 1 cent, to $7.11 per MMBtu. Yesterday (April 27), the price of the NYMEX futures contract for May delivery at the Henry Hub expired at $6.748 per MMBtu, decreasing roughly 31 cents, or about 4 percent, since last Wednesday. Natural gas in storage was 1,416 Bcf as of April 22, which is about 29 percent above the 5-year average. The spot price for West Texas Intermediate (WTI) crude oil decreased $1.08 per barrel, or about 2 percent, on the week to $51.37 per barrel or $8.857 per MMBtu.

 

 

Prices:

Spot prices increased less than 10 cents per MMBtu on average since last Wednesday, April 20, at most market locations outside the Northeast despite significant daily variability with increases and decreases of more than 20 cents per MMBtu.Crude oil prices, which had been climbing throughout the week before tumbling 5.5 percent yesterday (April 27), likely contributed to the continuing strength in natural gas prices despite moderating temperatures. The largest increases of 9 and 7 cents per MMBtu occurred in the West Texas and Midcontinent regions, respectively. in the Northeast and Alabama/Mississippi regions registered slight declines, as prices fell 5 and 1 cents per MMBtu on average during the week.Whether increasing or decreasing for the week (Wednesday-to-Wednesday), prices at most markets in the Lower 48 States remain about 20 percent higher than last year at this time.New York citygate, prices are $1.24 per MMBtu or 19 percent higher than last year at this time. Similarly, prices at the Henry Hub are about 22 percent above last year's level.

 

 

 

 

At the NYMEX, the price of the futures contract for May delivery at the Henry Hub decreased about 31 cents per MMBtu since last Wednesday, April 20, to expire yesterday (April 27) at $6.748 per MMBtu. Similarly, prices for the futures contracts through the 2005 injection season (May 2005 through October 2005) also decreased about 35 cents per MMBtu on average or about 5 percent on the week. Most of this decline occurred in trading late yesterday as crude oil prices unexpectedly dropped nearly $3.00 per barrel or about 5 percent. These declines reversed the gains in the natural gas futures market during the previous 4 trading days, Thursday, April 21 through Tuesday, April 26. Since becoming the near-month contract on March 30, the May contract declined about 65 cents per MMBtu or about 9 percent. Futures prices for delivery during the refill months of 2005 are high for this time of year. For example, the futures strip price for the remaining refill season months (June 2005 through October 2005) is $6.928 per MMBtu, which is about 14 percent above the futures strip price for the same period last year at this time. These relatively high futures prices during the summer months apparently reflect market expectations of persisting tightness in the natural gas market, despite continued high levels of working gas in storage levels relative to the 5-year-average. 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.

 

Storage:

Working gas inventories were 1,416 Bcf as of Friday, April 22, with implied net injections of 73 Bcf, according to EIA's Weekly Natural Gas Storage Report (See Storage Figure). This leaves storage levels 29.1 percent above the 5-year average for this week and 23.8 percent above last year's level of 1,144 Bcf. The net injection is 43 percent above the 5-year average of 51 Bcf for this week and marks the fourth week in a row that injections exceeded the 5-year average by at least 20 Bcf. The above average addition is mainly owing to injections of 45 Bcf in the East region, which is over 60 percent higher than the 5-year average in this region. The Producing and West regions also recorded net injections of 20 Bcf and 8 Bcf, respectively, but these are only slightly higher than average. During the week ending Thursday, April 21, warmer-than-normal weather across most of the Lower 48 States kept heating demand low and partly allowed for the relatively large injections to storage. Overall, temperatures were 36 percent warmer-than-normal as measured by the National Weather Service heating degree days (HDD). The only region that did not experience warmer-than-normal weather was the Pacific region, which maintained normal temperatures for the week (See HDD table). The temperatures did not result in significant cooling degree days.

 

Other Market Trends:

New EIA Policy for Storage Data Revisions The Energy Information Administration (EIA) issued a Federal Register notice on Tuesday, April 26, establishing a new policy that allows for the unscheduled release of revisions to weekly estimates of working gas storage volumes reported in EIA's Weekly Natural Gas Storage Report (WNGSR). Under the new policy, revisions shall be disseminated on a Federal workday between 2:00 and 2:10 p.m. (Eastern Time) following public notification between 1:00 and 1:10 p.m. of the same day when the effect of reported changes is at least 10 billion cubic feet (Bcf) at either a regional or national level. Previously, revisions could be reported only at the regularly scheduled time of the WNGSR and only if the effect of the change is greater than 7 Bcf. The newly issued Federal Register notice was a result of the previous notice issued January 7, requesting public comments on proposed changes to the current policy for handling revisions to information disseminated in the WNGSR. EIA received 26 sets of comments, most of which were from energy firms and trade groups. The policy will become effective with the WNGSR released on May 19, 2005, containing data as of May 13, 2005. The Federal Register notice can be accessed on the Web at http://www.eia.doe.gov/oss/WNGSR-Unscheduled-Release-Policy-Final-April2005.pdf.

 

2004 LNG Imports Reach Record Levels: Liquefied natural gas (LNG) imports, still a small share of total imports, have grown significantly in recent years to record levels. LNG imports surged in 2004 to approximately 652 Bcf, continuing the upward trend from 2003 when LNG imports reached 507 Bcf. Trinidad and Tobago for the fifth consecutive year was the source country with the largest volume of imports to the United States, delivering 462 Bcf in 202 cargos in 2004, which was almost 71 percent of total LNG imports in 2004, according to a recent report from the Department of Energy's Office of Fossil Energy. Algeria supplied the second largest volume of LNG with 120 Bcf. Other than Trinidad and Tobago and Algeria, source countries for U.S. LNG imports in 2004 included Malaysia (19.9 Bcf), Australia (14.9 Bcf), Qatar (11.9 Bcf), Nigeria (11.8 Bcf), and Oman (9.4 Bcf). In 2004, Dominion's Cove Point, Maryland, terminal received the largest volume of any U.S. terminal with receipts of 209 Bcf. Distrigas received almost 174 Bcf, all from Trinidad and Tobago, at its Everett, Massachusetts, terminal. Southern Union's Trunkline LNG terminal, located in Lake Charles, Louisiana, received close to 164 Bcf, while El Paso's Elba Island, Georgia, terminal received the least of the four operating terminals with 105 Bcf. Although LNG imports to the continental United States reached historical highs in 2004, they still represent only about 2.9 percent of U.S. consumption and 15.5 percent of U.S. imports. According to EIA, LNG imports are expected to grow to much higher levels, given the expected expansion of global LNG trade and as more U.S. LNG regasification terminals come on line.

 

Summary:

Natural gas spot prices increased slightly at most market locations outside of the Northeast region since last Wednesday, April 20. The May futures contract expired yesterday at $6.748 per MMBtu, which is about 9 percent less than its level on March 30 when it became the near-month contract. Working gas in storage climbed to 1,416 Bcf, which is about 29 percent above the 5-year average.

Short-Term Energy Outlook