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Natural Gas Weekly Update Archive

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








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 2,758 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.



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.

Short-Term Energy Outlook