for week ending November 16, 2005 | Release date: November 17, 2005 | Previous weeks
Overview:
Thursday, November 17 (next release 2:00 p.m. on December 1)
Since
Wednesday, November 9, natural gas spot prices have increased at virtually all
market locations in the Lower 48 States, with increases exceeding $2 per MMBtu at most markets.
On Wednesday, November 16, prices at the Henry Hub averaged $11.04 per MMBtu, increasing $1.73 per MMBtu,
or more than 18 percent, since the previous Wednesday. The futures contract for December delivery has
increased 66 cents per MMBtu, or about 6 percent on
the week (Wednesday-Wednesday), settling at $12.329 per MMBtu
yesterday (November 16). Natural gas in
storage was 3,282 Bcf as of November 11, which is
about 6 percent above the 5-year average.
The spot price for West Texas Intermediate (WTI) crude oil decreased $1.80
per barrel, or about 3 percent, on the week to $57.85 per barrel or $9.974 per MMBtu.
Spot prices increased at most
market locations by more than $2 per MMBtu since last
Wednesday, November 9, despite significant price declines of as much as $1.86
per MMBtu through Friday, November 11. A price rally began on Monday, November 14,
and grew progressively stronger and more geographically widespread each day,
culminating in large across-the-board gains through Wednesday, November 16. The East and West coast regions of the Lower
48 States saw prices climb between $1.65 and $2.00 per MMBtu
on average, while the areas in between had even larger price spikes. The largest price increases occurred in the Midcontinent and Rocky Mountains regions, where prices
climbed by as much as $2.82 per MMBtu. Colder temperatures moving into most of the
Lower 48 States, and the lingering natural gas production shut-ins in the Gulf
of Mexico likely contributed to the price increases. However, the Minerals Management Service
(MMS) reported that shut-in natural gas production fell to 3.7 Bcf per day as of Wednesday, November 16, from its level of
4.0 Bcf per day the previous Wednesday. Cumulative shut-in production since August 6,
2005, reached 450 Bcf as of November 16, which is
equivalent to 12.3 percent of yearly natural gas production in the Gulf of
Mexico. Lingering uncertainty in the natural gas market about the sufficiency of
supplies and the severity of the upcoming winter also appears to be providing
support to the elevated price level, as prices at most market locations remain
about $3 to $5 or about 45 to 72 percent above last year's level at this
time. Prices at the Henry Hub on
Wednesday, November 16, exceeded last year's level by $4.47 per MMBtu or about 68 percent.
At
the NYMEX, the price of the futures contract for December delivery at the Henry
Hub increased about 66 cents per MMBtu or about 6 percent
since Wednesday, November 9, to $12.329 per MMBtu.
Prices for the other futures contracts through March 2006 increased about 6 percent
or about 75 to 78 cents per MMBtu during the same
period. The 12-month futures strip (December 2005 through November 2006) traded
at a premium of 33 cents per MMBtu relative to the
Henry Hub spot price, averaging $11.37 per MMBtu as
of Wednesday, November 16. Nevertheless,
the futures contract prices for the upcoming heating season months (December 2005
through March 2006) are $1.81 per MMBtu higher than the
Henry Hub spot price on average. Since
November 4, 2005, the December futures contract has traded at a premium of $1.71
per MMBtu and $3.08 per MMBtu
to the Henry Hub spot price before the spread narrowed to $1.29 per MMBtu yesterday (Wednesday, November 16). Differentials of this magnitude between the
spot price and the futures contract prices provide suppliers economic
incentives to continue injecting gas into storage through the remainder of the
month, which results in higher demand for natural gas on the spot market.
Recent
Natural Gas Market Data
Estimated Average Wellhead Prices |
||||||
|
May-05 |
Jun-05 |
Jul-05 |
Aug-05 |
Sept-05 |
Oct-05 |
Price
($ per Mcf) |
6.02 |
6.15 |
6.69 |
7.68 |
9.76 |
10.97 |
Price
($ per MMBtu) |
5.86 |
5.99 |
6.51 |
7.48 |
9.50 |
10.68 |
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 3,282 Bcf
as of Friday, November 11, which is 5.8 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 inventory change was an increase of 51 Bcf, compared with a 5-year average decrease of 3 Bcf and no net change in
inventory during the report week last year. Natural gas production shut-ins
from Hurricanes Katrina and Rita reduced supplies from the Federal waters of
the Gulf of Mexico by an estimated 26 Bcf during the
report week, according to the Minerals Management Service (MMS). Even so,
demand losses from power outages and off-line industrial complexes in the Gulf
Coast region may have resulted in increased supplies available for injection
into storage. Moderate temperatures across the United States also likely
limited demand for space-heating during the first full week of the heating
season (See Temperature Maps).
Heating degree days (HDDs) were below normal in each
region, resulting in overall HDDs more than 40 percent
below normal for the Lower 48 States in the week ending November 10, according
to the National Weather Service. As of November 11, natural gas in storage was
50 Bcf below the level at the same time last year and
179 Bcf above the 5-year average.
Other Market Trends:
Third Quarter Financial
Performance of Major Energy Companies: On Thursday,
November 10, the Energy Information Administration (EIA) issued its quarterly "Financial
News for Major Energy Companies" that reported recent trends in the financial performance of major
energy companies from July through September 2005. In this year's third quarter, 21
companies reported overall net income of $26 billion, which is 69 percent
higher than in the third quarter of 2004.
The report cited higher crude oil and natural gas prices, higher
refining margins, slightly higher demand in the countries comprising the
Organization for Economic Cooperation and Development (OECD), and higher
foreign refinery throughput as primary reasons for the increase in net income.
Broken down by worldwide lines of business, petroleum operations
increased net income by 51 percent between third quarter 2004 and third quarter
2005. This jump consists of a 43 percent
increase in income from oil and natural gas production and a 73 percent
increase in income from refining and marketing.
The upward trends in income occurred despite an 11 percent decrease in
domestic crude oil production and a 7 percent decrease in natural gas
production by the U.S. companies who reported production estimates. EIA also
reported a 13 percent rise in earnings from downstream natural gas and power
operations owing to warmer weather, higher natural gas liquids prices, and
reduced operational costs. Chemical operations was the only line of business to report
lower third-quarter earnings than last year.
According to the report, companies cited higher feedstock costs and
effects of hurricanes to explain the 56 percent reduction in earnings.
Summary:
Natural
gas spot prices increased at virtually all market locations in the Lower 48
States since last Wednesday, November 16.
Prices for the futures contracts for the upcoming winter (December 2005
through March 2006) continued to trade at a large premium to the Henry Hub spot
price. Working gas in storage was 3,282 Bcf, which is about 6 percent above the 5-year average.