for week ending September 14, 2005 | Release date: September 15, 2005 | Previous weeks
Overview:
Thursday, September 15 (next release 2:00 p.m. on September 22)
Since
Wednesday, September 7, natural gas spot prices have increased at most market
locations in the Lower 48 States, owing at least partially to the aftermath of
storm activity in the Gulf of Mexico.
For the week (Wednesday-Wednesday) however, prices at the Henry Hub decreased
25 cents, or about 2 percent, to $10.80 per MMBtu.
Yesterday (September 14), the price of the NYMEX futures contract for
October delivery at the Henry Hub settled at $11.166 per MMBtu, decreasing by only 3.5 cents or about 0.3 percent
since last Wednesday (September 7).
Natural gas in storage was 2,758 Bcf
as of September 9, which is 3.7 percent above the 5-year average. The spot price for West Texas Intermediate
(WTI) crude oil increased 82 cents per barrel, or 1.3 percent, since last
Wednesday, trading yesterday at $65.20 per barrel or $11.24 per MMBtu.
Natural
gas prices rose at most market locations, as the natural gas industry tried to
cope with the aftermath of Hurricane Katrina and as storm-related shut-ins continue
to reduce gas production in the Gulf of Mexico. Adding to the mix is the
perception that Hurricane Katrina related shut-ins could be longer-lasting than
those of 2004 Hurricane Ivan's. However, the price at the Henry Hub and a
number of other markets in the Gulf coast area declined for the week. As of yesterday, September 14, the Minerals
Management Service (MMS) reported that 3.5 Bcf of
natural gas still remains shut in as a result of the storm activity in the Gulf
(see Other Market Trends). Despite moderating temperatures, the lost production
continued to give a boost to spot prices across much of the Lower 48 States. On
the week, the largest increases tended to cluster in the Midwest, Northeast,
and Midcontinent regions. The price increases in
these regions ranged between 7 and 67 cents per MMBtu
or about 1 and 6 percent. Prices at the Henry Hub decreased by 25 cents or a little
over 2 percent on the week. While prices
at most trading points in Louisiana declined, prices at a number of other
locations increased by as much as 86 cents or about 7 percent.
At
the NYMEX, the price of the futures contract for October delivery at the Henry
Hub decreased only about 3 and a half cents per MMBtu or 0.3 percent since last Wednesday, September
7, to $11.166 per MMBtu. Unlike the near-month futures contract price, the futures
contracts for delivery during the heating season months exhibited increases
that ranged between 6 and 23 cents as
increasing petroleum prices and supply uncertainty caused by the production
disruptions continue to boost prices in the futures market. While the October
2005 contract is currently trading at a premium to the Henry Hub spot price of
about 37 cents per MMBtu, futures
contract prices for each month from November 2005 through March 2006 exceed the
Henry Hub spot price by at least $0.97 to about $1.67 per MMBtu. The 12-month strip,
which is the average price for contracts over the next 12 months, closed
yesterday at $10.785 per MMBtu, an increase of 21
cents, or about 2 percent on the week.
Recent
Natural Gas Market Data
Estimated Average Wellhead Prices |
||||||
|
Mar-05 |
Apr-05 |
May-05 |
Jun-05 |
Jul-05 |
Aug-05 |
Price
($ per Mcf) |
5.98 |
6.44 |
6.02 |
6.15 |
6.69 |
7.68 |
Price
($ per MMBtu) |
5.82 |
6.27 |
5.86 |
5.99 |
6.51 |
7.48 |
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 2,758 Bcf as of Friday,
September 9, which is 3.7 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 89 Bcf is 3 percent above the 5-year average of 86 Bcf and about 7 percent less than last year's injection of
96 Bcf. It is
also the largest net injection since the beginning of July and marks the first
time since late June that the implied net injection has exceeded the 5-year
average. Despite continued natural gas
production shut-ins in the Gulf of Mexico, which reduces supplies from what
they otherwise would have been, the relatively large net injection occurred as
futures prices hold a significant premium to the Henry Hub spot price offering
a strong economic incentive to store natural gas for the winter heating
season. Moderate temperatures across the
United States also likely contributed to the above average net injection (See
Temperature Maps).
While the nation as a whole experienced 12.5 percent more cooling degree
days than normal, temperatures in key market centers along both the south Atlantic
and Pacific coasts were cooler-than-normal, likely reducing demand for natural
gas fired electric generation to meet air conditioning demand.
Other Market Trends:
Update
on Impacts of Hurricane Katrina: The
damage to oil and gas infrastructure in the Gulf of Mexico (GOM) is still being
evaluated as the industry tries to return to a normal level of production.
Current reports show that 84 of the 819 platforms and 2 of the 134 rigs
operating in the Gulf sustained damage that could not be repaired by yesterday.
As of Wednesday, September 14, the Minerals Management Service (MMS) reported
that 3.5 billion cubic feet (Bcf) per day of natural
gas and 844 thousand barrels of oil per day still remain shut in. While the
shut-in volumes of gas and oil represent about 35 percent and 56 percent of
daily GOM production, respectively, the volumes shut in have been significantly
reduced since last Thursday, September 8, when 4.0 Bcf
of gas and 902 thousand barrels per day of oil were shut in and 125 platforms
and 5 rigs were evacuated. The cumulative (8/26/05-9/14/05) shut-in production
is about 99 Bcf of gas and slightly more than 20.5
million barrels of oil. According
to MMS reports, the impact of Hurricane Katrina is much more severe than that
of Hurricane Ivan. Additional details on
the impact of Hurricane Katrina on energy markets are provided in special EIA
reports available at http://tonto.eia.doe.gov/oog/special/eia1_katrina.html.
EIA Releases Short-Term Energy Outlook Forecasting Impacts of Katrina: The EIA examines several possible recovery
scenarios in its first Short Term Energy
Outlook since Hurricane Katrina caused disruptions to energy markets. The monthly report, released September 7, predicts that residential heating bills for natural
gas this winter (October 2005- March 2006) will increase by 52 percent for the
country as a whole. Because there is
considerable uncertainty regarding the extent of Katrina's damage, EIA has
established three basic scenarios (slow recovery, medium recovery, and fast
recovery) to represent a range of outcomes for oil and natural gas supply over
the next several months and through 2006.
In all three cases, return to normal oil and natural gas production is
assumed to be achieved or nearly achieved by December 2005. The report predicts increases in natural gas spot prices this year of between 37
percent and 50 percent depending on the region of the country and the strength
of the winter under a medium recovery case.
The Henry Hub natural gas spot price in the medium recovery case
is expected to average $8.82 per thousand cubic feet (Mcf)
in 2005 and $8.42 per Mcf in 2006. Domestic natural gas production in 2005 is
expected to drop by 1.5 percent mainly because of the major disruptions to
infrastructure in the Gulf of Mexico from both Ivan and Katrina. Natural
gas storage levels at the end of October are expected to be about 270 Bcf below the year-ago level and about 50 Bcf below the 5-year average.
Summary:
Natural
gas spot prices increased across much of the Lower 48 States since last
Wednesday, September 7, as continued reduction in natural gas production
supported price increases on most spot market locations outside the Gulf coast
region. While the price of the near-month NYMEX futures contract decreased on
the week, prices of contracts for delivery during the heating season increased
and continue to exhibit considerable premiums to the Henry Hub spot price. Working
gas in storage increased to 2,758 Bcf,
which is about 3.7 percent above the 5-year average.