for week ending July 20, 2005 | Release date: July 21, 2005 | Previous weeks
Overview:Thursday, July 21 (next
release 2:00 p.m. on July 28)
Since
Wednesday, July 13, changes to natural gas spot prices were mixed, increasing
at most market locations in the Lower 48 States, while declining at most
markets in the Rocky Mountains, California, and Midwest regions.For the week (Wednesday-Wednesday), prices at
the Henry Hub declined 3 cents, to $7.75 per MMBtu.Yesterday (July 20), the price of the NYMEX
futures contract for August delivery at the Henry Hub settled at $7.550 per MMBtu, declining about 35 cents or about 4 percent since
Wednesday, July 13.Natural gas in
storage was 2,339 Bcf as of July 15, which is about
10 percent above the 5-year average.The
spot price for West Texas Intermediate (WTI) crude oil decreased $3.27 per
barrel, or about 5 percent, on the week to $56.73 per barrel or $9.78 per MMBtu.
Spot price changes were mixed since last Wednesday, July
13, with increases occurring at most market locations in the Lower 48
States.Muggy weather and hot
temperatures in most of the Lower 48 States likely contributed to the price
increases, despite the influence of declining crude oil prices and the
restoration of some natural gas production in the Gulf of Mexico.The Minerals Management Service reported that
shut-in natural gas production in the Gulf of Mexico resulting from Hurricane
Emily declined to 0.616 billion cubic feet (Bcf) per
day as of Wednesday, July 20, down from the shut-in peak of 0.701 Bcf per day reported on Tuesday, July 19.Price declines occurred principally in the
California, Rocky Mountains, and Midwest regions, where prices fell between 4
and 7 cents on average since last Wednesday, July 13.In the Texas and Louisiana regions, price
changes were varied but prices remained within about 5 cents per MMBtu of their level on last Wednesday.Prices increased elsewhere in the Lower 48
States with the largest increases occurring in the Northeast region, where
price hikes ranged between 4 and 40 cents per MMBtu
and most increases exceeded 25 cents.As
of July 20, 2005, natural gas prices at most market locations in the Lower 48
States are about 30 to 40 percent above last year"s levels.At $7.75 per MMBtu,
prices at the Henry Hub are $2.03 per MMBtu, or 35
percent, above last year"s level at this time.
At
the NYMEX, the price of the futures contract for August delivery at the Henry
Hub decreased 4 percent since Wednesday, July 13, to $7.550 per MMBtu. Similarly, prices for the futures contracts through
the remainder of the 2005 injection season (September 2005 through October
2005) fell about 35 cents per MMBtu or about 4
percent. Futures prices for these months became "backwardated,"
as the Henry Hub spot price ranged between 9 and 20 cents higher than the
prices for futures contracts for August 2005 through October 2005, with
successively lesser differentials in each succeeding month.This likely reflects the effects of increased
tightness in the natural gas spot market, owing to the production shut-ins in
the Gulf of Mexico and the continued warm temperatures in most regions.Despite the backwardation through the
injection season months, prices for futures contracts for delivery during the
5-month heating season, November 2005 through March 2006, continue to exceed
the spot price by as much as $1.26 per MMBtu and
about $1.02 on average.
Recent
Natural Gas Market Data
Estimated Average Wellhead Prices |
||||||
|
Jan-05 |
Feb-05 |
Mar-05 |
Apr-05 |
May-05 |
Jun-05 |
Price
($ per Mcf) |
5.52 |
5.59 |
5.98 |
6.44 |
6.02 |
6.15 |
Price
($ per MMBtu) |
5.37 |
5.44 |
5.82 |
6.27 |
5.86 |
5.99 |
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 2,339 Bcf as of Friday, July
15, which is 10.4 percent above the 5-year average inventory level for the
report week, according to EIA"s Weekly Natural Gas Storage Report (See Storage Figure).This stock level implies a net injection of
59 Bcf, which is about 23 percent less than both the
5-year average and last year"s injection of 77 Bcf
for the report week.At 2,339 Bcf, storage levels are 220 Bcf
above the 5-year average inventory level and 122 Bcf
above the stock level at this time last year.
The lower-than-normal injection is partly due to decreased production in
the Gulf of Mexico where Hurricane Dennis caused shut-ins of offshore natural
gas production.According to the
Minerals Management Service, cumulative shut-in gas production between Friday,
July 8 and Friday, July 15 totaled more than 23 Bcf.Higher-than-normal temperatures across most
of the Lower 48 States during the report week also likely contributed to the
below-average net injection.(See Temperature Maps)
The nation as a whole experienced more
than 11 percent more cooling degree days than normal with the relatively
greatest deviations above normal generally located in New England, the Middle
Atlantic, and East and West North Central regions.
Other
Market Trends:
AGA Releases Winter Heating Season Survey
Results:On July 19, 2005, the American Gas
Association (AGA) released a survey of local distribution companies regarding
their peak-day and peak-month supply practices during the winter heating season
of 2004-2005. The survey reflects responses from 54 AGA member companies that serve
customers in 30 states. The survey showed that during this past winter about 70
percent of utility companies used some type of financial instrument to hedge at
least a portion of their natural gas supplies from price fluctuations.That was 15 percent more than 3 years ago
when only 55 percent of the survey respondents used financial tools. When asked
about their regulatory environment, 37 of the companies indicated that
financial losses and gains were treated equally within their hedging plans.
Only three noted that losses and gains were treated unequally.According to the AGA, the majority of the
companies surveyed plan to use financial tools to hedge the same amount of
natural gas and some plan to hedge even more of their supplies for this
upcoming winter.On the physical side,
47 companies reported using storage as a primary hedging tool. Twenty-nine of
those companies hedged between 26-50 percent of winter heating season supplies
using underground storage compared with 22 companies last year. Several
companies noted that storage (as a physical hedge) is the only hedge they
employ, choosing not to use financial instruments at all.
Minerals Management Service Announces Final Rule:The
Minerals Management Service (MMS) of the Department of the Interior announced a
Final Rule for offshore floating platforms on July 19, 2005.The Final Rule creates regulations for
floating platforms through reference to existing industry standards, which will
save the public funds in developing separate and/or duplicate government
standards. Until now, the MMS has not specifically distinguished between
floating and fixed platforms. The Final Rule also streamlines the permitting
process for floating platforms.MMS said
the changes were needed owing to the industry's increasing reliance on floating
facilities following the development of new technologies that enable drilling
and production in deeper waters while reducing costs. Deepwater areas of
the Outer Continental Shelf (water depths greater than 1,000 feet, or 305 meters)
in 1993 accounted for approximately 12 percent of the oil and 2 percent of the
gas produced offshore. By the end of 2004, deepwater areas accounted for
about 62 percent of the oil and 32 percent of the gas produced offshore.
Minimal changes to regulations concerning oil and gas production safety systems
and pipeline rights-of-way also were included in the Final Rule. The Final
Rule will take effect on August 18, 2005.
Summary:
Natural
gas spot prices increased at most market locations outside the California,
Rocky Mountains, and Midwest regions of the Lower 48 States since last
Wednesday, July 13.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 2,339 Bcf, which is about 10 percent above the 5-year
average.