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Overview:  Thursday, June 30 (next release 2:00 p.m. on July 7)

Natural gas spot prices dropped in almost all locations this week (Wednesday – Wednesday, June 22-29) partly because of a decline in cooling demand across much of the Lower 48 States.  The Henry Hub spot price decreased 33 cents, or about 4.5 percent, to $7.07 per MMBtu, while locations in the West generally saw the largest decreases ranging between 27 cents and 71 cents per MMBtu.  The price of the NYMEX futures contract for July delivery expired Tuesday (June 28) at $6.976, decreasing about 47 cents per MMBtu, or 6.2 percent, since last Wednesday (June 22).  Natural gas in storage as of Friday, June 24 was 2,123 Bcf, which is 14.7 percent above the 5-year average.  The spot price for West Texas Intermediate (WTI) crude oil declined $1.04 per barrel, or about 2 percent, since last Wednesday, ending trading yesterday (June 29) at $57.28.  The WTI crude oil spot price experienced an all-time high price of $59.78 per barrel on Monday, June 27.   




Nearly all trading locations in the Lower 48 States experienced decreases in natural gas spot prices of up to 71 cents since last Wednesday, June 22.  The Henry Hub spot price declined 33 cents, or about 4.5 percent, over the week to average $7.07 per MMBtu yesterday.  The largest decreases were in the Western regions as cooler temperatures in California and the Rockies partly led to price declines averaging 58 cents per MMBtu or about 9 percent.  Also contributing to the lower prices in California were high linepack operational flow orders in place at two large distributors during this report week, indicating high supplies in local markets.  Relatively high, summer-like temperatures in the Northeast resulted in more modest decreases in spot prices than in other regions, but temperatures were not hot enough to result in significant cooling demand.  The region experienced an average decrease in spot prices of 7 cents per MMBtu, despite price gains at all three of Transcontinental Gas Pipe Line’s trading locations (Zone 5, Zone 6 non New York, and Zone 6 New York). 



At the NYMEX, trading in the futures contract for July delivery at the Henry Hub expired on Tuesday, June 28, at $6.976 per MMBtu, marking a price decrease of 46 cents since last Wednesday (June 22).  This expiration price for the July contract is about 60 cents, or 6 percent, higher than its settlement price on May 27 when it first became the near-month contract.  It is also about 14 percent higher than the expiration price of the July 2004 contract of $6.141 per MMBtu.  The August 2005 contract settled yesterday (June 29) in its first day as the near-month contract at $7.087 per MMBtu after dropping 43 cents during this report week.  Similarly, the futures contracts through the remainder of the refill season (Sep and Oct) decreased by at least 40 cents per MMBtu.  Contracts for the next heating season (Nov 2005 to March 2006) decreased an average of 22 cents per MMBtu to settle at an average of $8.408 yesterday (June 29), which holds a $1.34 premium to the Henry Hub spot price.  This differential offers a strong economic incentive for industry to inject gas into storage. 


Recent Natural Gas Market Data


Estimated Average Wellhead Prices








Price ($ per Mcf)







Price ($ per MMBtu)







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 2,123 Bcf as of Friday, June 24, which is 14.7 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 92 Bcf is 1 Bcf more than the 5-year average injection for the report week of 91 Bcf and equal to last year’s injection of 92 Bcf.  Working gas levels are 198 Bcf more than the level estimated for this time last year and this difference is unchanged from last week’s measure.  Temperatures during the report week were higher than normal across the West North Central and Rocky Mountains census regions, roughly normal in the West South Central region, but cooler than normal in the remaining regions of the Lower 48 States (See Temperature Maps).  Overall, cooling degree days in the Lower 48 States were about 13 percent below normal, which likely encouraged injections during the week.  Through the first 12 weeks of the refill season, net injections into working gas storage have averaged nearly 73 Bcf per week, almost 6 percent greater than the 5-year average of 69 Bcf during the period.  If net injections into working gas through the remainder of the refill season continue at an average rate, working gas stocks would be close to 3,400 Bcf by the start of the heating season (November 1, 2005). 


Other Market Trends:

Minerals Management Service Announces Results of Lease Sale 194: The Department of the Interior’s Minerals Management Service (MMS) recently announced the outcome of Lease Sale 194 for tracts in the Central Gulf of Mexico (GOM) that resulted in the receipt of $342,027,467 for 403 tracts.  The leases were awarded following the completion of an extensive bid evaluation process.  The lease sale was held on March 16, 2005, and encompassed 428 unleased blocks totaling approximately 21.4 million acres in the Central GOM Outer Continental Shelf Planning Area offshore Louisiana, Mississippi, and Alabama. Eighty companies submitted 651 bids on the 428 tracts but 19 high bids were considered to be below market value. The offered tracts are located from 3 to about 210 miles offshore in water depths of 4 to more than 3,400 meters (approximately 13 to 11,155 feet).  One of the companies declined six of its awarded leases, which resulted in the forfeiture of the 1/5th bonus bid deposit for each lease – about $674.  Estimates of undiscovered economically recoverable hydrocarbons in this lease sale area range from 0.265 to 0.34 trillion cubic feet of natural gas.



Natural gas spot prices decreased at almost all market locations in the Lower 48 since last Wednesday, June 22, with the largest decreases occurring in the Rockies and California.  The July futures contract expired Tuesday, June 28 at $6.976 per MMBtu, which is 46 cents or about 6 percent lower than last week. NYMEX contracts for August delivery traded at $7.087 per MMBtu yesterday. Working gas in storage increased to 2,123 Bcf, which is 14.7 percent above the 5-year average.


 Short-Term Energy Outlook




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