for week ending July 27, 2005 | Release date: July 28, 2005 | Previous weeks
Overview: Thursday,
July 28 (next release 2:00 p.m. on August 4)
Since
Wednesday, July 20, natural gas spot prices have decreased at all market
locations in the Lower 48 States. For
the week (Wednesday-Wednesday), prices at the Henry Hub decreased by about 3
percent to $7.50 per MMBtu. Yesterday (July 27), the price of the NYMEX futures
contract for August delivery at the Henry Hub settled at $7.647 per MMBtu in
its final day of trading, increasing roughly 10 cents or about 1 percent since
last Wednesday (July 20). Natural gas in
storage was 2,381 Bcf as of July 22, which is 9 percent above the 5-year
average. The spot price for West Texas
Intermediate (WTI) crude oil rose $2.39 per barrel or about 4 percent on the
week to $59.12 per barrel or $10.19 per MMBtu.
Despite record-setting heat and power usage in many areas, spot market prices declined at all market locations since last Wednesday, July 20. High linepack on some western pipeline systems, returning production in the Gulf of Mexico from storm related shut-ins, and the lack of a threat to offshore production from the latest tropical storms likely played a role in price decreases on the week. According to the final report on Hurricane Emily released by the Minerals Management Service (MMS), as of Friday, July 22, remaining shut-in production was down to107 MMcf per day of natural gas and 7,886 barrels of oil per day. Natural gas price decreases were widespread, ranging between 17 and 64 cents per MMBtu, or 2 and 9 percent at all market locations. Prices at the Henry Hub decreased 25 cents or about 3 percent since last Wednesday, while most other locations decreased by an average of 38 cents per MMBtu. The largest decreases in spot prices since Wednesday, July 20, principally occurred in the major gas-consuming areas, as prices in the Northeast, the Midwest, and the Midcontinent decreased by an average of 45 cents per MMBtu. Price declines were less pronounced in major gas-producing areas, where prices in Texas, Louisiana, and Rocky Mountains recorded average declines of 35 cents per MMBtu.
At
the NYMEX, the price of the futures contract for August delivery at the Henry
Hub increased about 10 cents per MMBtu or about 1 percent since last Wednesday
to $7.647 per MMBtu in its final day of trading yesterday (July 27). After opening as the near-month contract at
$7.087 per MMBtu, the price for the August contract increased by 56 cents or 8
percent. Unlike the near-month futures
contract price, the prices of the futures contracts for delivery in each of the
remaining 4 months of 2005 decreased from last Wednesday's level. Futures
contract prices for each month through the remaining months of 2005 and January
2006 exceed the Henry Hub spot price by $0.09 to $1.54 per MMBtu with the
difference for each successive month larger than that of the preceding month.
The January 2006 contract traded at a $1.54 premium to the Henry Hub spot price
yesterday. With the futures strip through next winter trading at a significant
premium to the Henry Hub spot price, economic incentives to inject gas into
storage remain significant. However, the
expected large cooling demand for natural gas and uncertainty about future
storm activity in the Gulf of Mexico will likely continue to compete with
natural gas for storage during the warmest days of summer.
Recent
Natural Gas Market Data
Estimated Average Wellhead Prices |
||||||
|
Jan-05 |
Feb-05 |
Mar-05 |
Apr-05 |
May-05 |
Jun-05 |
Price
($ 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 totaled 2,381 Bcf as of Friday, July 22, according to EIA's Weekly
Natural Gas Storage Report. Working gas inventories are roughly 9.0 percent
above the 5-year average for the report week, and about 4.1 percent above the
level last year for the same week (See Storage Figure).
The implied net injection during the week ending July 22 was 42 Bcf, which is
the lowest net injection reported since May 6, when storage activity may have
been influenced by lingering cold weather. The implied net injection fell 36
percent below the 5-year average of 66 Bcf for the report week and 40 percent
below last year's estimated net injection for the week of 70 Bcf. The falloff
in net additions to underground storage was driven, at least in part, by higher
temperatures as demand for gas-fired power generation increased to meet
air-conditioning needs across the country. During the report week, the weather
for the country as a whole was about 29 percent warmer than normal, as measured
by cooling degree days (CDDs) for the week ending July 21, according to the
National Weather Service (See Temperature Maps).
Moreover, key markets for cooling demand were considerably warmer than normal.
In the East North Central region, including Chicago and other major population
centers, CDDs were 53 percent above normal. In the Middle Atlantic region, CDDs
were about 54 percent above normal.
Other Market Trends:
EIA
Announces Changes to Estimation of Weekly Natural Gas Storage
Stocks: The Energy Information
Administration (EIA) will revise the estimation system used to produce the Weekly
Natural Gas Storage Report (WNGSR).
The effective date for the new system is August 4, 2005, when working
gas estimates as of July 29 will be released. On August 4, EIA also will release
storage estimates based on the new methodology for all weeks from June 17, 2005
to July 22, 2005. The new system changes the sample of companies used for
estimation and the approach used to estimate the total volume of working gas in
storage from the weekly sample data. The
selected method of estimation uses both recent data from the EIA-191, "Monthly and Annual Underground Storage
Report," and the latest data collected on the weekly EIA-912 survey. The
new method is based on analysis of data trends on an individual company
basis. Company-specific estimates are
summed to produce regional and national totals.
This is a distinct departure in approach from the current method, which
estimates the total volume for non-sample companies as a group based on the
aggregate volume of a set of sample companies. A summary discussion of the
changes is available at: http://tonto.eia.doe.gov/oog/info/ngs/methchange-2005.html.
DOE Funds New Way to Raise Natural Gas Supplies and
Water: The Office of Fossil Energy's
National Energy Technology Laboratory (NETL) has announced the
commercialization of a new technology designed to boost supplies of natural gas
and water. The technology, developed by
Drake Engineering of Helena, Montana, and funded by NETL, will help producers
extracting coalbed natural gas (CBNG) to clean up the co-produced water so that
it can be used for irrigation and other beneficial purposes. Coalbeds are natural aquifers, and the water
in coalbeds maintains the pressure that keeps the methane adsorbed to the
coal. In order to extract CBNG, water is
pumped to the surface to lower the pressure in the coalbed reservoirs, which
then helps release the methane. That methane can be used in natural gas
pipelines with no additional treatment. The new technology removes sodium from
the water in order to make it a useful resource. Without this treatment,
operators might be forced to choose between expensively treating water and
shutting in the wells. If rendered
suitable, the CBNG water could help the western states solve their water
shortage problem. Further, because
coalbed resources are well known in the United States, exploration risk is
minimal, and the shallow depths associated with CBNG drilling keeps drilling
costs relatively low. Economically
recoverable resources of CBNG are estimated at 100 trillion cubic feet—more
than half the Nation's total proved conventional natural gas reserves.
Summary:
Spot
prices decreased at all market locations in the Lower 48 States, with decreases
ranging between 17 and 64 cents per MMBtu. Prices for the August NYMEX futures
contract increased about 1 percent from last week's level. Working gas in
storage increased to 2,381 Bcf, which is 9 percent above the 5-year average.