for week ending October 26, 2005 | Release date: October 27, 2005 | Previous weeks
Overview:
Thursday, October 27 (next release 2:00 p.m. on November 3)
Natural
gas spot prices increased sharply this week (Wednesday-Wednesday, October 19-26),
as a large volume of production
continued to be shut in from the recent major hurricanes and cool temperatures
added space-heating demand in many regions of the country. For the week, the
price at the Henry Hub increased $1.15 per MMBtu, or
about 8.5 percent, to $14.67. At the New York Mercantile Exchange (NYMEX), the
price of the futures contract for November delivery at the Henry Hub moved
about 49 cents per MMBtu higher to settle yesterday
(Wednesday, October 26) at $14.04. A steady pace of injections into underground
storage has continued despite offshore production shut-ins of almost 5.6 billion
cubic feet (Bcf) a day, indicating substantial demand
loss in the wake of the hurricanes and amid the high-price environment. The
volume of natural gas in storage was 3,139
Bcf as of Friday, October 21, which is 2.8 percent
higher than the 5-year average. The
spot price for West Texas Intermediate (WTI) crude oil decreased $1.26 per
barrel or about 2 percent since last Wednesday to trade yesterday at $60.85, or
$10.49 per MMBtu.
With yet more tropical storm activity in the Gulf of
Mexico, producers evacuated offshore platforms again this week and the volume
of shut-in gas increased slightly. Unlike Katrina and Rita, Hurricane Wilma did
not pass through any major U.S. producing areas in the Gulf and the effects of
the hurricane on offshore production were minimal. However, natural gas prices
increased last week as cool temperatures moved into many regions of the country
and blanketed the Northeast. Price increases on the week were widespread, with gains
of $0.90 per MMBtu or more at most market locations.
The Henry Hub price has risen in the past three consecutive trading sessions,
including increases of more than 75 cents per MMBtu
in each of the last two days, ending the week at $14.67 per MMBtu.
This is the highest price for next day delivery at the Henry Hub since before
Hurricane Rita. Other trading locations in producing areas along the Gulf Coast
in Louisiana and East Texas registered increases ranging from $0.54 to $1.33
per MMBtu. The single exception to price increases in
the region occurred in trading for delivery into Florida, where power outages
dampened demand and led to a decrease of $0.52 per MMBtu
in the price at Florida Gas Transmission's Zone 2. In the Northeast, daytime high
temperatures were in the 40s in some areas. The result was this week's highest
price increases in the country. Prices in the Northeast gained an average of
$1.77 per MMBtu. The price for gas off
Transcontinental Gas Pipe Line into New York City increased $1.90 per MMBtu to $16.03, a $1.36-premium to the Henry Hub price.
Prices increased significantly in the Rockies and the West Coast as well,
albeit slightly less so than in the East. The price at the Southern California
border increased $0.39 per MMBtu, or 3.5 percent, to
$11.67. Trading locations in the Rockies registered an average increase of
$0.58 per MMBtu to trade at an average of $11.28
yesterday. This average price at Rockies trading locations yesterday was $3.39
per MMBtu lower than the Henry Hub price,
underscoring the strain on supplies in the Gulf region. As of Wednesday,
October 26, shut-ins from the recent hurricanes are still at 5.56 Bcf per day and have totaled 354 Bcf,
according to the Minerals Management Service.
The
prices of futures contracts also moved up this week in response to early-season
cool temperatures and lingering effects from the hurricanes. The price of the
NYMEX futures contract for November delivery gained $0.491 per MMBtu on the week to settle at $14.04 yesterday (October
26). Before decreasing 29.8 cents per MMBtu
yesterday, the price of the near-month contract on Tuesday reached a record
high settlement price for a near-month contract at $14.338. Contracts for the
entire next heating season (November 2005 through March 2006) increased an
average of nearly 20 cents per MMBtu to settle at
$14.09. Beyond the winter months, futures contract prices are significantly.below the prices for this winter. As a
result, the 12-month strip, which is an average of futures prices for the
coming year, traded nearly $2.00 per MMBtu less than
the average price for contracts this winter. Still, on the week, the price of the
12-month strip increased almost 13 cents per MMBtu to
$12.10 since last Wednesday (October 19).
Recent
Natural Gas Market Data
Estimated Average Wellhead Prices |
||||||
|
Apr-05 |
May-05 |
Jun-05 |
Jul-05 |
Aug-05 |
Sept-05 |
Price
($ 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 underground storage as of October 21 was 3,139 Bcf,
which is 2.8 percent above the 5-year average inventory level for the week
according to EIA's Weekly
Natural Gas Storage Report (See Storage Figure).
The net addition to storage was 77 Bcf, which is
significantly higher than both the 5-year average net injection of 45 Bcf
and the net injection of 31 Bcf during the report
week last year. This marks the fifth time since June 3, 2005, that the weekly
net injection exceeded the 5-year average net increase, as current storage
levels climbed to 85 Bcf more than the 5-year
average. Seasonably mild temperatures throughout the country likely generated
little weather-sensitive demand, allowing for the continuing net injections.
During the report week, the weather for the country as a whole was warmer than
normal, as measured by degree days for the week ending October 20, according to
the National Weather Service (See Temperature Maps)
Other Market Trends:
EIA Releases Report on Futures Contract Prices
as Predictors of the Spot Price: The
Energy Information Administration (EIA) released a report titled An Assessment of
Prices of Natural Gas
Futures Contracts As A Predictor of
Realized Spot Prices at the Henry Hub, which analyzes how well futures prices predict the future spot
prices. The article compares realized Henry Hub spot market prices for natural
gas during the three most recent winters (November-March) with futures prices
as they evolved from April through the following February, when trading for the
March contract ends. Comparing monthly futures and spot market prices provides
a basis to assess the performance of futures prices as a predictor of spot
prices. The analysis of price data for recent years shows that futures prices
are relatively poor predictors of the Henry Hub spot price that is realized
during the corresponding delivery or target month, and even the final futures
price for a given contract often does not anticipate correctly the realized
average spot price.
Summary:
Natural
gas prices this week increased as much as $2.13 per MMBtu
as unseasonably cool temperatures this week covered much of the Midwest and
Northeast, including major natural gas consuming centers. The Henry Hub spot
prices increased $1.15 per MMBtu to $14.67. Natural gas
in storage increased to 3,139 Bcf as of October 21,
leaving inventories 2.8 percent above the 5-year average.