for week ending August 17, 2005 | Release date: August 18 , 2005 | Previous weeks
Overview:
Thursday, August 18 (next release 2:00 p.m. on August 25)
Since
Wednesday, August 10, natural gas spot prices increased more than 50 cents per MMBtu at virtually all market locations in the Lower 48
States, with increases exceeding $1 per MMBtu in the
Northeast and Gulf of México regions.
For the week (Wednesday–Wednesday), prices at the Henry Hub increased
$1.17 per MMBtu, or more than 13 percent, to $9.98
per MMBtu.
Yesterday (August 17), the price of the NYMEX futures contract for September
delivery at the Henry Hub settled at $9.391 per MMBtu,
climbing about 32 cents or nearly 4 percent since Wednesday, August 10. Natural gas in storage was 2,515 Bcf as of August 12, which is about 6 percent above the
5-year average. The spot price for West
Texas Intermediate (WTI) crude oil decreased $1.51 per barrel, or about 2
percent, on the week to $63.29 per barrel or $10.91 per MMBtu.
Spot
prices increased at virtually all market locations since last Wednesday, August
10, as prices hit record levels for this time of the year at many
locations. Muggy weather and hot
temperatures in most of the Lower 48 States likely contributed to the price
increases, despite the modest declines in crude oil prices. Prices increased more than $1 per MMBtu, or about 10 to 17 percent, at most market locations
in the Northeast and Gulf of Mexico regions.
Elsewhere, price increases ranged between $0.50 and $1 per MMBtu since last Wednesday.
Price increases in the California and Rocky Mountains regions ranged
between 50 and 70 cents generally since last Wednesday, while prices in the
Midwest and Midcontinent regions gained just under $1
per MMBtu at most market locations. As of August 17, 2005, natural gas prices at
most market locations in the Lower 48 States are about 60 to 90 percent above
last year’s levels. At $9.98 per MMBtu, prices at the Henry Hub have increased by $2.60 per MMBtu, or more than 35 percent, in the three and one-half
weeks since July 25, when the most recent pattern of increasing prices began.
Henry Hub spot prices also are $4.72 per MMBtu, or
nearly 90 percent, above last year’s level at this time.
At
the NYMEX, the price of the futures contract for September delivery at the
Henry Hub increased 32 cents per MMBtu or nearly 4
percent since Wednesday, August 10, to $9.391 per MMBtu.
Prices for the futures contracts through March 2005 increased between 11 and 32
cents per MMBtu with successively smaller increments for
each delivery month. Futures prices for the contracts from September 2005
through November 2005 became “backwardated,” as the
Henry Hub spot price yesterday was between 59 and 21 cents higher than the
prices for futures contracts for those months.
This likely reflects the effects of increased tightness in the natural
gas spot market, owing to the continued warm temperatures in most regions and
tightness in coal-fired and hydro-electric electricity supply. With spot prices surging and futures prices
showing relatively modest gains since last Wednesday, the 12-month futures
strip traded at a discount of about 63 cents to the spot price on Wednesday,
August 17. Nevertheless, the prices for
futures contracts for delivery during the peak heating season months, December
2005 through March 2006, continue to exceed the spot price by as much as $0.41
per MMBtu and about $0.28 on average.
Recent
Natural Gas Market Data
Estimated Average Wellhead Prices |
||||||
|
Feb-05 |
Mar-05 |
Apr-05 |
May-05 |
Jun-05 |
Jul-05 |
Price
($ per Mcf) |
5.59 |
5.98 |
6.44 |
6.02 |
6.15 |
6.69 |
Price
($ per MMBtu) |
5.44 |
5.82 |
6.27 |
5.86 |
5.99 |
6.51 |
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 as of August 12 totaled 2,515
Bcf, which is 5.9 percent above the 5-year average
inventory level for the reporting week, according to EIA’s
Weekly Natural Gas Storage Report (See
Storage Figure). The net addition to storage
was 52 Bcf, which is 15 percent below the 5-year
average net injection of 61 Bcf and more than 30
percent below the net injection of 77 Bcf during the
report week last year. This marks the seventh consecutive week that the implied
net injection for the report week was lower than the 5-year average injection,
which has reduced the difference between current storage levels and the 5-year
average to 140 Bcf from 227 Bcf
at the beginning of the injection season (April 1). Throughout much of the
report week, temperatures were once again considerably warmer-than-normal, also
for the seventh consecutive week, according to the number of cooling degree
days (CDDs) as measured by the National Weather
Service (See Temperature
Maps). CDDs for the Lower 48 States for the week ending
August 11 numbered about 18 percent more than normal and more than 60 percent
greater than last year. All Census regions with the exception of the West South
Central region experienced greater than normal CDDs.
The largest deviations from normal occurred in the Northeast, as CDDs in the New England and Middle Atlantic regions
numbered, respectively, 66 and 47 percent more than normal.
Other Market Trends:
Lease Sale 196 Held with New
Provisions for Ultra-Deep Water Leases: The Minerals Management
Service (MMS) received 422 bids on 346 tracts in the Western Gulf of Mexico Oil
and Gas Lease Sale 196 on August 17, 2005.
This is the first lease sale held since new provisions in the Energy
Policy Act of 2005 created two new royalty suspension volume categories in
ultra-deep water areas (greater than 1,600 meters, or approximately 5,249
feet). The new legislation, signed into
law on August 8, 2005, replaces the 1,600 meters or deeper category of royalty
relief with two new categories: (1)
leases located in water depths of 1,600 to 2,000 meters (5,249 to 6,562 feet)
receive royalty relief on 12 million barrels of oil equivalent (BOE)
(equivalent to approximately 68 billion cubic feet of gas); and (2) leases
located in water depths greater than 2,000 meters receive royalty relief on 16
million BOE (approximately 90 Bcf). Of the 422 bids, approximately 25 percent are
in ultra-deep water, with the deepest tract bid in 3,278 meters (about 10,755
feet) of water. Twenty-six tracts in the
first category (1,600 – 2,000 meters) received bids and 60 tracts in the second
category (2,000 meters or deeper) received bids. This is an increase from the 2004 Western
Gulf sale in which 55 blocks in water depths greater than 1,600 received
bids.
Federal Judge
Blocks Offshore Drilling in California: On Friday,
August 12, a Federal judge in California ruled that the Minerals Management
Service (MMS) could not extend 36 undeveloped oil and natural gas leases off
the coast of California until an extensive environmental risk assessment is
conducted. The leases, which are located
off the central California coast from Oxnard north to San Luis Obispo, were
issued to companies between 1968 and 1984, but none have been put into
production. They were set to expire over
15 years ago, but MMS has succeeded in extending the leases since then. The Federal judge’s decision comes one day
after the California Coastal Commission, a State government agency, voted to
authorize the State’s attorney general to file suit if the MMS attempts to
extend the leases again. The Commission
reasoned that Federal authorities failed to provide sufficient information on
the potential for negative environment impact.
EIA Releases New Annual Energy Review:
The Energy Information Administration (EIA) released the Annual Energy Review 2004 (AER) on
August 15, 2005. This publication provides annual energy statistics, such as
total production, consumption, and trade through 2004. The publication also includes overviews of
petroleum, natural gas, coal, electricity, nuclear energy, renewable energy
sectors, as well as international energy statistics. The natural gas overview
shows that in 2004 consumption was 22.3 trillion cubic feet (Tcf), production was 18.8 Tcf, and
net imports were 3.4 Tcf. According to the AER, the consumption of
natural gas in 2004 was about 53 Bcf or 0.2 percent
less than the previous year’s consumption of about 22.4 Tcf. Similarly, natural gas production was almost
260 Bcf or 1.4 percent less than the 2003 level of
more than 19 Tcf, whereas net imports were almost 100
Bcf or 3 percent more than the 3.3 Tcf in 2003.
Summary:
Natural
gas spot prices increased at virtually all market locations in the Lower 48
States since last Wednesday, August 10.
Prices for the futures contracts for the upcoming heating season
(November 2005 through March 2006) continued to trade at a premium to the Henry
Hub spot price, despite the backwardation of the 12-month futures strip. Working gas in storage was 2,515 Bcf, which is about 6 percent above the 5-year
average.