Overview:  Thursday, October 6 (next release 2:00 p.m. on October 13)

Natural gas spot prices increased at all market locations since Wednesday, September 28, despite milder temperatures, as Gulf of Mexico supply shut-ins continue.  Although the force majeure has been partially lifted at the Henry Hub, no daily gas trades have been reported since Thursday, September 22.  Prices at other locations in Louisiana however saw an average increase of $1.65 per MMBtu or about 12 percent for the week (Wednesday to Wednesday). The NYMEX futures contract for November delivery at the Henry Hub increased about 8 cents since last Wednesday to close yesterday  (October 5) at $14.183 per MMBtu.  Natural gas in storage as of Friday, September 30, was 2,929 Bcf, which is 1.4 percent above the 5 year average.  The spot price for West Texas Intermediate (WTI) crude oil decreased $3.80 per barrel, or about 6 percent, since last Wednesday to trade yesterday at $62.56 per barrel or $10.79 per MMBtu.

 

 

Prices:

With large amounts of offshore production still shut-in in the Gulf of Mexico, natural gas spot prices increased at all market locations over the period covered by this report (September 28 to October 5).  The Minerals Management Service (MMS) reported that as of Wednesday, October 5, shut-in natural gas production is 6.9 Bcf per day, which is equivalent to 66.3 percent of the daily gas production in the Federal offshore Gulf of Mexico.  This daily shut-in natural gas reflects a 15 percent improvement compared with last week at this time.  On October 4, Sabine Pipe Line partially lifted the force majeure on several points of its Henry Hub facility.  However, no gas trades have been reported there since September 22.  At other locations in Louisiana, the average spot price was $15.03 per MMBtu yesterday, which is an average increase of $1.65 per MMBtu or 12 percent for the week in these locations.  The rise in spot prices in the Lower 48 States ranged from $1.06 per MMBtu to $3.18 per MMBtu.  The largest relative jump in prices occurred in South Texas with an average increase of $2.91 per MMBtu or 29 percent for the week.  Northeast markets saw an average increase of $2.17 per MMBtu for the week as prices yesterday ranged between $14.44 per MMBtu and $16.34 per MMBtu.  This is the only region in the Lower 48 States where prices at any market location exceeded $16 per MMBtu.  The Rockies and California experienced more modest prices this week ranging between $11.12 and $12.25 per MMBtu yesterday, but these are still on average $1.62 more than last Wednesday. 

 

 

At the NYMEX, the futures contract for November delivery hit its highest settlement price of $14.224 on Tuesday, before settling at $14.183 per MMBtu yesterday.  For the week, the November contract gained 8 cents per MMBtu or less than 1 percent.  The January 2006 futures contract climbed to its highest price yesterday settling at $15.13, which is the highest price listed on the NYMEX and almost 2 percent higher than last Wednesday.  It is also the only NYMEX futures contract ever to surpass $15 per MMBtu.     Prices for all contracts for the upcoming heating season (November 2005 – March 2006) increased this week, gaining an average of 19 cents per MMBtu to settle at an average of $14.67 per MMBtu.  All other contracts for months beyond March 2006 decreased on the week by an average of 56 cents.  The 12-month strip, which is an average of futures prices for the coming year, lost 20 cents per MMBtu this week to average $12.25 per MMBtu. 

 

Recent Natural Gas Market Data

 

Estimated Average Wellhead Prices
	Apr-05	May-05	Jun-05	Jul-05	Aug-05	Sept-05
Price ($ per Mcf)	6.44	6.02	6.15	6.69	7.68	9.76
Price ($ per MMBtu)	6.27	5.86	5.99	6.51	7.48	9.50
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.

 

Storage:

Working gas in storage increased to 2,929 Bcf as of Friday, September 30, which is 1.4 percent above the 5-year average inventory level for the report week, according to EIA’s Weekly Natural Gas Storage Report (See Storage Figure). During a week in which hurricane-related production shut-ins continued, the implied net injection of 44 Bcf was well below both the 5-year average of 72 Bcf and last year’s injection of 79 Bcf.  New production losses from Hurricane Rita and continued natural gas production shut-ins from Hurricane Katrina reduced supplies by an estimated 48 Bcf from the Federal waters of the Gulf of Mexico during the report week, according to data reported by the Minerals Management Service (MMS). Even so, demand losses from power outages and off-line industrial complexes in the Gulf Coast region may have at least partially offset the reduced production, mitigating the impact on supplies available for injection into storage. Additionally, outside of the West South Central Census region, moderate temperatures across the United States likely limited natural gas-fired demand for electric generation to meet air conditioning needs and demand for space-heating needs (See Temperature Maps). In the West South Central region, cooling degree days numbered 120, which was nearly double the normal number for the week ending September 29, according to the National Weather Service. Natural gas in storage is 151 Bcf below the level at the same time last year, but 40 Bcf above the 5-year average.

 

Other Market Trends:

EIA Releases Advance Summary of Domestic Proved Reserves Report:  The Energy Information Administration (EIA) on Tuesday, October 4 published an advance summary of the annual report on crude oil, natural gas, and natural gas liquids proved reserves for 2004.  The report states that total U.S. proved natural gas reserves increased 1.8 percent in 2004 to 192,523 Bcf.  This is the sixth year in a row and the tenth year out of the past eleven that natural gas proved reserves have increased.  This increase occurred despite an unusually large 15-percent decrease in proved reserved in the Gulf of Mexico owing to a low level of new field discoveries and relatively large negative revisions to proved reserves.  Increased onshore drilling pushed the net reserves higher, but volumes from discoveries of new gas fields were the lowest in 12 years and total U.S. dry gas production declined by 1 percent in 2004.  Proved reserves of crude oil fell 2.4 percent to 21,371 million barrels (bbl) and proved reserves of natural gas liquids rose 6.3 percent in 2004 to 7,928 million bbl.  The report on the EIA website presents key data tables and some highlights of petroleum industry activity that affected oil and natural gas production and proved reserves in 2004. The full report is scheduled to be published in November 2005 and will contain more comprehensive data.    

   

 

Summary:

Natural gas spot prices exhibited increases at all market locations ranging from $1.06 per MMBtu to $3.18 per MMBtu since last Wednesday, September 28, as shut-ins of natural gas production in the Gulf of Mexico continue.  The November futures contract settled at $14.183 per MMBtu yesterday, which is 8 cents per MMBtu or less than 1 percent higher than last week.  Working gas in storage increased to 2,929 Bcf with an implied net injection of 44 Bcf. 

 

 Short-Term Energy Outlook