for week ending June 8, 2005 | Release date: June 9, 2005 | Previous weeks
Overview:
Thursday, June 9 (next release 2:00 p.m. on June 16)
Higher
demand for natural gas from power generators meeting air-conditioning needs likely
contributed to natural gas spot prices climbing $0.38 to $1.28 per MMBtu at
most trading locations since Wednesday, June 1. On the week
(Wednesday-Wednesday, June 1-8), the Henry Hub spot price rose 86 cents per
MMBtu to $7.22. The NYMEX futures contract for July delivery gained 21.1 cents
per MMBtu on the week to a daily settlement price of $7.00 on Wednesday, June
8. Working gas in storage as of Friday, June 3, increased to 1,890 Bcf, which
is 20.2 percent above the 5-year (2000-2004) average inventory for the week.
The spot price for West Texas Intermediate (WTI) crude oil decreased $1.89 per
barrel on the week to $52.51, or $9.05 per MMBtu.
Prices
moved higher this week as summer-like temperatures pervaded much of the
country, resulting in higher demand from power generators. The Henry Hub spot
price on Wednesday, June 8, increased to its highest level since April 25,
2005, averaging $7.22 per MMBtu. The Henry Hub price and most other Gulf Coast
prices gained approximately 14-15 percent in value on the week, perhaps in part
owing to reports of this year's first tropical storm forming in the Caribbean.
Although Tropical Storm Arlene's path is uncertain, the National Hurricane
Center as of Wednesday believed the storm would take a course east of offshore
production in the Gulf of Mexico. In the Northeast region, prices increased an
average of $1.14 per MMBtu in tandem with higher Gulf prices, with demand in
both regions likely higher owing to hotter weather and the associated higher
air-conditioning load. The price for spot gas off Tennessee Gas Pipeline in the
Northeast rose $1.25 per MMBtu on the week to $8.00, the highest price in the
country. Prices in the West, including the Rockies, registered lower gains of
between 38 and 61 cents per MMBtu as temperatures in the region were more
moderate. The price at the PG&E Citygate in Northern California increased
47 cents on the week to $6.42 per MMBtu.
At
the NYMEX, the futures contract for July delivery gained 21.1 cents, or 3.1
percent, on the week. Most of the increase in value came during Monday's
session as weather forecasts called for sustained hot temperatures. As the
near-month contract, the July contract has risen 63 cents per MMBtu, or almost
10 percent, in value since its first daily settlement price of $6.37 on May 27.
The July contract is currently priced about 86 cents per MMBtu, or 14 percent,
higher than the expiration price for the July 2004 contract ($6.141). The basis differential between the Henry Hub
spot price and the average price for the futures contracts for next heating
season (November 2005 – March 2006) at the end of trading yesterday was nearly
89 cents per MMBtu. This basis continues to provide suppliers an economic
incentive to inject gas into storage in preparation for heating demand next
winter. The 12-month strip, or the average price for contracts over the next
year (July 2005 – June 2006), closed yesterday at $7.517 per MMBtu, a gain of
10.8 cents per MMBtu on the week.
Recent
Natural Gas Market Data
Estimated Average Wellhead Prices |
||||||
|
Dec-04 |
Jan-05 |
Feb-05 |
Mar-05 |
Apr-05 |
May-05 |
Price
($ per Mcf) |
6.25 |
5.52 |
5.59 |
5.98 |
6.44 |
6.02 |
Price
($ per MMBtu) |
6.08 |
5.37 |
5.44 |
5.82 |
6.27 |
5.86 |
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 1,890 Bcf as of Friday, June 3, 2005, according to the EIA Weekly
Natural Gas Storage Report(See Storage
Figure). The current stock levels are 20.2
percent above the 5-year average for the report week and the second highest
level for this week in the weekly storage data from 1994 to 2004. The implied
net injection during the report week was 112 Bcf, marking the first time during
the current refill season that the implied net change exceeded 100 Bcf. At 112 Bcf, net injections were about 13
percent above the 5-year average of 99 Bcf for the week and about 12 percent
above the addition of 100 Bcf reported for the same week last year. Below
normal temperatures in most regions of the Lower 48 States during the week
ended June 2 likely contributed to the higher-than-average rate of injections.
As measured by cooling degree days (CDDs), temperatures in the Pacific and
Mountain census regions were above normal, while temperatures in all other
regions were below normal. (See Temperature
Maps)
Other
Market Trends:
The
Department of Energy (DOE) Moves Forward with Alaskan Pipeline Loan Guarantee
Program: The
Department of Energy on May 27, 2005, published a Notice of Inquiry in the Federal
Register seeking public comment on an $18 billion loan guarantee program to
encourage construction of a pipeline that will bring Alaskan natural gas
to the continental United States. The Notice seeks further comments following
the provisions in the "Alaska Natural Gas Pipeline Act" requiring that
DOE facilitate the construction of a pipeline or liquefied natural gas project
to bring natural gas from the Alaska North Slope to the Lower 48 States. DOE noted that the rising demand and minimal
increases in natural gas supply have resulted in high natural gas prices that
affected residential and industrial users around the country. The Notice requests public comment on the
loan guarantee program and on specific issues about how the program should be
administered. No final decision has been made on whether regulations to
implement the loan guarantee program are needed. The comment period closes on
July 26, 2005.
EIA Releases the Short-Term Energy Outlook for June 2005: The Energy
Information Administration (EIA) expects that natural gas prices at the Henry
Hub will average about $6.90 per Mcf in 2005, according to the agency's Short
Term Energy Outlook, released June 7. Owing to mild weather and
moderating crude oil prices, the Henry Hub average spot gas price fell to $6.66
per Mcf in May, which was 64 cents per Mcf less than the April price. As the summer cooling demand increases over
the next few months, the natural gas market is more likely to tighten,
according to the report Natural gas
prices are expected to increase during the winter months with monthly spot
prices likely to reach $7.50 per Mcf by the end of 2005. The Henry Hub price is expected to average
about $7.10 per Mcf in 2006. EIA noted
that it expects the higher prices despite relatively high levels of working gas
in storage. Working gas in storage is estimated to be more than 1,800 billion
cubic feet at the end of May, a level more than 10 percent higher than both one
year ago and the 5-year average.
Summary:
Natural
gas spot prices at most market locations in the Lower 48 States increased $0.38
to $1.28 per MMBtu owing to higher demand with the temperatures warming across
the country. The NYMEX price for July delivery at the Henry Hub climbed about
21 cents per MMBtu to a close of $7.00 on Wednesday, June 8. Natural gas in
storage increased to 1,890 Bcf as of June 3, which implied a net injection on
the week of 112 Bcf. As a result, the difference between the volume of gas
currently in working storage and the 5-year average expanded to 317 Bcf.