for week ending December 21, 2005 | Release date: December 22, 2005 | Previous weeks
Overview:
Thursday, December 22, 2005 (next release 2:00 p.m. on January 5, 2006)
Spot
prices have decreased at virtually all market locations in the Lower 48 States
this week as moderating temperatures relative to the prior week reduced
space-heating demand and prices for competing petroleum products eased. For the
week (Wednesday-Wednesday, December 14-21), the Henry Hub price decreased $1.25
per MMBtu to $13.55. At the New York Mercantile
Exchange (NYMEX), the price of the futures contract for January delivery
settled yesterday (December 21) at $14.271 per MMBtu, which was about 41 cents per MMBtu, or 2.8 percent, lower on the week. The Energy
Information Administration (EIA) reported that working gas in storage was 2,804
Bcf as of Friday, December 16, which reflects an
implied net decrease of 162 Bcf. The spot price for
West Texas Intermediate (WTI) crude oil decreased $2.30 per barrel, or about
3.8 percent, on the week to settle yesterday at $58.56 per barrel, or $10.10
per MMBtu.
Much
of the country is finally receiving a reprieve from the blasts of arctic air
that have prevailed this December, leading to lower space-heating demand. Spot
prices have fallen for the week in a range from $0.64 to $2.10 per MMBtu. Since last Wednesday, December 14, the spot price at
the Henry Hub has fallen about 8 percent, with much of the Louisiana trading
locations registering similar decreases. The largest price declines during the
week principally occurred in producing areas in West Texas, Rockies and the
Mid-continent, where prices dropped between $1.39 and $2.10 per MMBtu. One significant development in regional pricing has
been large differentials between prices at market locations in the Gulf region,
reflecting intraregional transportation bottlenecks following the hurricane
season. The price at the Houston Ship Channel yesterday was $11.59 per MMBtu, which was $1.96 less than at the Henry Hub. In the
Northeast declines were more moderate on the week at an average of $1.38 per MMBtu. The price at the New York citygate
registered the largest Wednesday-Wednesday decline in the region, falling $1.82
per MMBtu, or 11 percent, to $14.66. The New York citygate price as of yesterday reflected a premium of $1.11
per MMBtu over the Henry Hub price, down considerably
from the more than $2.00 premium in mid-December and closer to more typical
differentials for this time of year.
NYMEX futures prices for delivery in the rest of the
heating season (January-March) fell this week by relatively large amounts. The
near-month contract (for January delivery) declined for the week by $0.408, as
it settled yesterday (December 21) at $14.271 per MMBtu. Still, following the colder-than-normal first
half of December, the January contract is trading $2.54 per MMBtu
higher than on the first day of its tenure as the near-month contract. This
contract is also still priced $8.06 per MMBtu more
than the final settlement price of $6.21 for the January 2005 contract. The
February and March contracts declined $0.383 and $0.324 per MMBtu, respectively, to settle yesterday at $14.345
and $14.278. Despite the price declines for these contracts, futures contract
prices for delivery through the rest of this winter were at a significant
premium to the Henry Hub contract in the past few days. This marks a reversal of the pattern for
recent weeks in which the futures contract prices were below the Henry Hub
spot. If the current pattern persists,
this may have important implications for storage utilization strategies in the
latter half of this month. While the
futures contract for April delivery declined $0.044 per MMBtu,
prices for contracts for the rest of the year rose an
average of 6.7 cents. On the week, the 12-month
strip, which is the average price for futures contracts over the next 12
months, closed yesterday at $11.98, an increase of 5.2 cents since last
Wednesday.
Recent
Natural Gas Market Data
Estimated Average Wellhead Prices |
||||||
|
Jun-05 |
Jul-05 |
Aug-05 |
Sept-05 |
Oct-05 |
Nov-05 |
Price
($ per Mcf) |
6.15 |
6.69 |
7.68 |
9.76 |
10.97 |
9.54 |
Price
($ per MMBtu) |
5.99 |
6.51 |
7.48 |
9.50 |
10.68 |
9.29 |
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. |
Natural
gas inventories for the lower 48 States stood at 2,802 Bcf as of Friday, December 16, according to the EIA's Weekly Natural Gas Storage Report. (See Storage Figure)
The net stock change from the previous week was an implied net withdrawal of
162 Bcf, which is 37
percent higher than the previous 5-year (2000-2004) average net withdrawal. At
the same time, this week's net change is 42 percent higher than the 114 Bcf withdrawal for the same week
last year. Despite the size of the net decrease in stocks, this inventory
remains at 2.3 percent above the 5-year average for the week. Similarly,
reported volumes for all three regions (East, West, and Producing) show stocks
that are up to 7.7 percent higher-than-average. Frigid temperatures across most
of the lower 48 States during the week covered by the storage report produced a
high amount of space heating demand. According to the National Weather Service,
temperatures for the country as a whole were about 14 percent colder than
normal, as measured by gas-customer weighted heating degree days (HDDs) (See Temperature Maps).
At the same time, temperatures for the
week ended December 15 were almost 30 percent colder than last year during the
same week. West North Central was the only census division that experienced
warmer-than-normal temperatures, as the recorded HDDs
were about 7 percent lower than normal. The rest of the census divisions east
of the Rockies were between 13 and 29 percent colder than normal.
Other Market Trends:
EIA
Publishes the Natural Gas Annual 2004: The
Energy Information Administration (EIA) published its Natural
Gas Annual 2004 (NGA2004)
on December 19, 2004, which provides comprehensive information on the supply
and disposition of natural gas in the United States. According to the NGA2004, the national average natural
gas wellhead price in 2004 was $5.46 per thousand cubic feet (Mcf), which is the highest annual wellhead price (based on
2004 constant dollars) in EIA's historical data
series. Recorded U.S. marketed production was 19.7 trillion cubic feet (Tcf) compared with 20.0 Tcf the previous
year. Marketed production in 2004 was
reduced by shut-ins resulting from Hurricane Ivan and an adjustment to Texas
production estimates. Recent EIA analysis indicates that prior EIA and Texas
State data likely overstated natural gas production by about 5 percent in
Texas. (A complete discussion of the
issue and changes to the data is available in the report, Adjusted
Estimates of Texas Natural Gas Production.) Total natural gas
imports climbed more than 9 percent in 2004 as receipts of both liquefied
natural gas (LNG) and pipeline imports from Canada rose, resulting in the first
increase in natural gas net imports since 2001.
Despite high prices and tight natural gas supplies,
natural gas consumption increased by 0.9 percent in 2004. The rising wellhead cost of natural gas
appeared to have a substantial impact on prices for natural gas to all
sectors. Storage entering the heating
season of 2004-2005 reached its highest level in 13 years. The NGA2004 also includes data for
production, transmission, storage, deliveries and price by State for 2004, as
well as summary statistics for each State for 2000 through 2004.
Natural Gas Liquefaction Capacity in the Atlantic
Basin Expands in 2005: Several liquefied natural gas (LNG) export
projects in the Atlantic Basin have been completed in 2005. These changes result in a large increase in
LNG supplies potentially available to the United States, however the United
States must compete for these supplies with other markets. In the Atlantic
Basin (Europe, Africa, and the Western Hemisphere, excluding an export terminal
in Alaska on the Pacific Ocean), one additional country, Egypt, began exporting
this year after the completion of production units in Damietta
and Idku. The projects are a one-train liquefaction
facility at Damietta with an annual capacity of 244 Bcf (5.0 million tons) and a two-train project at Idku that with a total annual capacity of 351 Bcf (7.2 million tons). The Atlantic LNG complex in
Trinidad and Tobago recently completed construction of a fourth train that
could produce an additional 253 Bcf (5.2 million
tons) per year. Trinidad and Tobago is the largest-volume supplier of LNG to
the United States, delivering 462 Bcf in 2004. Prior
to the completion of the fourth train, Trinidad and Tobago's three trains had
an annual capacity of 482 Bcf (9.9 million tons).
Although Nigeria has not supplied large volumes of LNG to the United States in
the past, exports are likely to increase in the near future with the completion
of two more trains at Nigeria's Bonny Island LNG plants. Capacity at the Bonny
Island plant is currently 463 Bcf (9.5 million tons).
The two additional trains, scheduled to begin commercial shipments early 2006,
will increase capacity by 400 Bcf per year (8.2
million tons per year). In 2006, Norway's Statoil,
which is relatively new to LNG markets, will begin exporting LNG from a
liquefaction terminal now being built on Melkøye
Island in the Norwegian Sea. The plant is expected to have a capacity of 200 Bcf per year (4.1 million tons per year). Exports from
these new plants are expected to be delivered to markets in Spain, France, and
the United States.
Summary:
Spot prices decreased significantly on the week at almost
all market locations as warmer temperatures moved into much of the country. The
Henry Hub price declined $1.25 per MMBtu, while
prices in the West generally showed steeper declines. While prices for futures contracts
for this heating season decreased, prices for contracts beyond April 2006 rose
slightly. Working gas in underground storage as of December 16 was 2,802 Bcf, which is 2.3 percent above the 5-year average.