for week ending October 19, 2005 | Release date: October 20, 2005 | Previous weeks
Overview:
Thursday, October 20 (next release 2:00 p.m. on October 27)
Since
Wednesday, October 12, spot prices decreased at virtually all market locations
in the Lower 48 States. For the week (Wednesday-Wednesday), prices at the Henry
Hub decreased 24 cents or about 2 percent to $13.52 per MMBtu.
Yesterday (October 19), the price of the NYMEX futures contract for
November delivery settled at $13.549 per MMBtu,
increasing about 3 cents or 0.2 percent since last Wednesday. The Energy
Information Administration (EIA) reported that working gas in storage was 3,062
Bcf as of Friday, October 14, which reflects an
implied net increase of 75 Bcf. The spot price for
West Texas Intermediate (WTI) crude oil decreased $2.02 per barrel, or about 3
percent, on the week to settle yesterday at $62.11 per barrel, or $10.71 per MMBtu.
Spot prices ended the week lower at most market
locations, with modest declines ranging mostly from about 5 to 50 cents. Higher prices on the week were seen at only six
locations scattered in the East Texas, Midcontinent,
the Rocky Mountains, and the Northeast regions, with increases averaging 29
cents. However, the week-on-week results mask unusually large price swings,
particularly the large decreases on Friday (October 14) and the sharp increases
on Monday (October 17). Generally mild temperatures nationwide, expected mild temperatures
for the weekend, and many storage facilities recording nearly full facilities supported
a decrease in spot prices on Friday, which declined across the board by an
average of 82 cents, with many declines of $1 or more. As news of yet another tropical
storm affected Monday trading, spot prices gained an average of $1.12 in the
Lower 48 States and up to $1.42 in some locations. Since Monday, however, price
declines at virtually all spot market locations resulted in price levels by
yesterday that were less than those of the preceding Wednesday. The El Paso Bondad location in the Rocky Mountain region noted a $1.30
per MMBtu decrease, the largest on the week in the
Lower 48 States. El Paso Bondad averaged yesterday at
$10 per MMBtu. The Henry Hub however showed a more
modest decrease on the week of about $0.25 per MMBtu,
trading yesterday at $13.52, or about 2 percent less
than on Wednesday, October 12.
At
the NYMEX, the price of the futures contract for November delivery at the Henry
Hub increased by about 3 cents during the week to settle at $13.549 per MMBtu on Wednesday, October 19. Futures prices increased on Monday, October 17,
as the market braced for Hurricane Wilma, the record 21st storm of
the hurricane season. After reaching $13.887 per MMBtu
on Monday, the price of the November 2005 contract declined about 34 cents as
the new projected storm path indicated that Wilma is expected to take a course
towards Florida instead of the producing areas of the West and Central Gulf of
Mexico. By contrast, prices of the
futures contracts for delivery during the remaining months in the 2005-2006
heating season decreased roughly 13 to 19 cents or about 1 percent per MMBtu since last Wednesday. Despite the price decreases,
contracts for delivery during the heating season traded yesterday at an average
premium of about 37 cents to the Henry Hub spot price, with differences ranging
up to 72 cents for the January delivery contract. The 12-month strip, or the
average price for contracts over the next year, closed yesterday at just under
$12 per MMBtu, a net increase
of a little more than 4 cents on the week.
Recent
Natural Gas Market Data
Estimated Average Wellhead Prices |
||||||
|
Apr-05 |
May-05 |
Jun-05 |
Jul-05 |
Aug-05 |
Sept-05 |
Price
($ 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. |
Working gas in storage as of October 14 totaled
3,062 Bcf, which is 1.8 percent above the 5-year
average inventory level for the week according to EIA's
Weekly Natural Gas Storage Report (See
Storage Figure). Working gas in underground
storage climbed past the 3,000 Bcf mark for the first
time in 2005. The net addition to
storage was 75 Bcf, which is about 34 percent above
the 5-year average net injection of 56 Bcf and about
16 percent above the net injection of 64 Bcf during
the report week last year. This marks the first time in 5 weeks, and the fourth
time since June 3, 2005, that the weekly net change exceeded the 5-year average
net increase, as current storage levels climbed to 53 Bcf
more than the 5-year average. Furthermore, this is the first time since
September 16, 2005, and the second time in the past 16 weeks that the net
change exceeded last year's levels.
During the report week, temperatures were moderate according to the
number of degree days as measured by the National Weather Service (See Temperature Maps). Based on degree days
in the Lower 48 States for the week ending October 13, only the Rocky
Mountains, West South Central, and West North Central U.S. Census regions
registered cooler-than-normal temperatures.
Moderate temperatures, favorable economics, and possible industrial
demand destruction owing to the elevated level of natural gas prices likely
contributed to the increased level of injections for the week. The 6-month futures strip traded at a
significant premium to the Henry Hub spot price throughout most of the report
week, providing economic incentives to continue injecting gas into storage.
Other Market Trends:
Natural Gas Rig Count: The number of rigs drilling for natural gas
in the United States was 1,262 as of Friday, October 14, 2005, according to
Baker-Hughes Incorporated. The current
number of rigs reflects a slight decrease from the record number of 1,273 set
during the week ending September 30, 2005, and is more than 19 percent higher
than the number of rigs drilling for natural gas during this week last
year. Of the total rigs currently
drilling in the United States, 85.2 percent are rigs drilling for natural gas. Although the percentage of total rigs
drilling for natural gas is down from the record high of over 89 percent in
June, it has remained over 85 percent for the past 5 weeks. Of the 1,262 natural gas rigs, 60 are located
in the Gulf of Mexico, which is 2 more than last
week's Gulf total. This rig count
reflects a number of offshore rigs that were lost or damaged owing to recent
hurricane activity in the Gulf of Mexico.
Current Assessment
of Hurricane Impact on Gas Processing Plants: As of October 19, 2005, 30 natural
gas processing plants in the coastal counties of Texas, Louisiana, Mississippi,
and Alabama, with capacities equal to or greater than 100 million cubic feet
per day, are active. These plants have a
total capacity of 12.9 billion cubic feet per day (Bcf/d)
and had a pre-hurricane flow of 8.7 Bcf/d. Current flows associated with the operating plants
are 93 percent of the pre-hurricane volumes.
In some cases, this flow may include volumes that bypass the plant. Another 16 processing plants in Louisiana and
Texas, with capacities equal to or greater than 100 million cubic feet per day,
are not active owing to the hurricanes.
These plants have an aggregate capacity of 9.71 Bcf/d,
and a total pre-hurricane flow volume of 5.45 Bcf/d. A number of inactive plants are operational,
but are not operating owing to upstream or downstream infrastructure problems
or supplies being unavailable. These operational
inactive plants have a total capacity of 1.35 Bcf/d
and had a pre-hurricane flow rate of 0.54 Bcf/d. A number of the inactive plants are expected
to be operating within 4 weeks. The
incremental available capacity at that time would be 2.23 Bcf/d
with pre-hurricane flow of 1.08 Bcf/d.
Summary:
Spot prices decreased on the week at almost all
market locations. While the November contract price increased, the futures
prices for delivery in the coming heating season decreased slightly but continue
to carry a premium over current cash prices.
Working gas in underground storage as of October 14 has exceeded 3 Tcf and was 1.8 percent above the 5-year average.