for week ending June 22, 2005 | Release date: June 23, 2005 | Previous weeks
Overview:
Thursday, June 23 (next release 2:00 p.m. on June 30)
Since
Wednesday, June 15, changes to natural gas spot prices were mixed, declining at
most markets in the Gulf of Mexico and Northeast regions while increasing at
most market locations in the Lower 48 States.
For the week (Wednesday-Wednesday), prices at the Henry Hub edged up 1
cent, to $7.40 per MMBtu. Yesterday (June 22), the price of the NYMEX
futures contract for July delivery at the Henry Hub settled at $7.442 per MMBtu, roughly equal to last Wednesday's settlement price
of $7.441 per MMBtu.
Natural gas in storage was 2,031 Bcf as of
June 17, which is about 15 percent above the 5-year average. The spot price for West Texas Intermediate
(WTI) crude oil increased $2.74 per barrel, or about 5 percent, on the week to
$58.27 per barrel or $10.047 per MMBtu.
Spot price changes were
mixed since last Wednesday, June 15, with increases occurring at most market
locations outside the Northeast and Gulf of Mexico regions of the Lower 48
States. Increasing crude oil prices and
continued warm weather in most regions of the Lower 48 States likely
contributed to the firmness in natural gas prices. Prices climbed more than 30 cents per MMBtu at most markets west of the Rocky Mountains and parts
of the West Texas and Midcontinent regions, with the
largest increase occurring at the El Paso Bondad
location in northwestern New Mexico. On
average, prices in the California, Arizona/Nevada, Rocky Mountains, and West
Texas regions increased between 43 and 56 cents per MMBtu. Elsewhere, price increases were less
pronounced with prices increasing between 10 and 20 cents per MMBtu at most locations in the Midwest. Since last Wednesday, June 15, prices fell at
most market locations in eastern and southern Texas, Louisiana, Alabama, and
Mississippi as Tropical Storm Arlene passed without incident. Natural gas markets in the Northeast region
saw the largest price declines in the Lower 48 States since last Wednesday,
with decreases ranging between 11 and 17 cents per MMBtu
as moderate temperatures moved into the region.
As of June 22, 2005, natural gas prices at most market locations in the
Lower 48 States are about 10 to 20 percent above last year's levels. At $7.40 per MMBtu,
prices at the Henry Hub are $1.11 per MMBtu, or 18
percent, above last year's level at this time.
At the NYMEX, the price of
the futures contract for June delivery at the Henry Hub increased slightly
since last Wednesday, June 15, to $7.442 per MMBtu.
Similarly, prices for the futures contracts through the remainder of the 2005
injection season (August 2005 through October 2005) were virtually unchanged
with decreases of less than 2 cents per MMBtu or less
than 1 percent. Futures prices remained in contango,
as prices for the futures contracts for August 2005 through October 2005 ranged
between 4 and 20 cents higher than the Henry Hub spot price, with successively
higher differentials in each succeeding month.
Despite the relatively narrow differentials through the injection season
months, the 12-month futures strip (July 2005 through June 2006) is trading at
a 59-cent premium to the Henry Hub spot price.
This is driven primarily by the large differentials of the futures
prices for the heating season months with respect to the Henry Hub spot price,
as prices for futures contracts for delivery during the 5-month period November
2005 through March 2006 continue to exceed the spot price by about $1.23 per MMBtu on average.
The steep contango in the natural gas futures
market throughout the heating season months provides suppliers significant
incentives to inject natural gas into storage.
Recent
Natural Gas Market Data
Estimated Average Wellhead Prices |
||||||
|
Dec-04 |
Jan-05 |
Feb-05 |
Mar-05 |
Apr-05 |
May-05 |
Price
($ 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 increased to 2,031 Bcf as of Friday, June
17, which is 15.4 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 injection of 75 Bcf is 18.5
percent below the 5-year average injection for the report week of 92 Bcf and 12.7 percent below last year's injection of 86 Bcf. Working gas
levels are 270 Bcf more than the 5-year average,
which is the smallest difference since the beginning of April. Temperatures during the report week were
higher than normal across most consuming regions in the eastern United States
but cooler than normal in most of the western regions (See Temperature
Maps). Overall, the
nation experienced 40 percent more cooling degree days than normal, which
likely contributed to the lower than average rate of injections.
Other
Market Trends:
EIA Publishes Report on Changes in Natural
Gas Transportation Infrastructure: The Energy Information (EIA) published a new
report, Changes
in U.S. Natural Gas Transportation Infrastructure in 2004,
on June 21, 2005, which reviews the level of growth that occurred within
the U.S. natural gas transportation network during 2004. Although capacity
additions in 2004 were almost 27 percent less than in 2003 (7.7 vs. 10.4 Bcf per day), there were several significant developments
in 2004, including six new pipeline systems with a total of 1.8 Bcf per day of additional capacity located in the deepwater
Gulf of Mexico and the extension of the Cheyenne Plains Pipeline, a 560 MMcf per day system that became operational in December
2004. Additionally, El Paso Natural Gas's southern leg expansion of 320 MMcf per day was completed in May 2004 and several new
non-interstate pipelines were installed in Texas in 2004 to increase
transportation services between East Texas production fields and interstate and
non-interstate pipeline interconnections within the State. Growth in natural gas pipeline import and
export capacity slowed as only one import expansion project was completed in
2004 and only one small, localized export point was added between Texas and
Mexico. While the amount of capacity
added in 2004 was the least since 2000, proposed projects for 2005-2007 total
44.4 Bcf per day.
Although all projects will likely not be realized, the number of proposals
suggests that expansion may be greater in the future.
Summary:
Natural
gas spot prices increased at most market locations outside of the Northeast and
Gulf of Mexico regions of the Lower 48 States since last Wednesday, June
15. Prices for the futures contracts for
the upcoming heating season (November 2005 through March 2006) continued to
trade at a significant premium to the Henry Hub spot price. Working gas in storage was 2,031 Bcf, which is about 15 percent above the 5-year
average.