for week ending January 4, 2006 | Release date: January 5, 2006 | Previous weeks
Overview: Thursday, January 5, 2006 (next release 2:00 p.m. on January 12, 2006)
Since
Wednesday, December 21, natural gas spot prices have decreased at all market
locations in the Lower 48 States, with decreases exceeding $3 per MMBtu or
about 27 percent at all markets. These
declines principally occurred from December 21 through December 28. On Wednesday, January 4, prices at the Henry
Hub averaged $9.25 per MMBtu, reflecting a decline of $4.30 per MMBtu or about
32 percent since Wednesday, December 21, and an additional 66 cents per MMBtu
since Wednesday, December 28. The
futures contract for February delivery at the Henry Hub settled at $10.197 per
MMBtu yesterday (January 4), falling about $4.16 per MMBtu or about 29 percent
since Wednesday, December 21. Natural
gas in storage was 2,641 Bcf as of December 30, which is about 7 percent above
the 5-year average. Since December 21,
the spot price for West Texas Intermediate (WTI) crude oil increased $4.85 per
barrel, or about 8 percent to $63.41 per barrel or $10.933 per MMBtu.
Natural gas prices in the
past two weeks continued their downward trend from a relative peak on December
13. Spot prices decreased at all market
locations by more than $3 per MMBtu since Wednesday, December 21, as
unseasonably mild weather moved into most of the Lower 48 States. The Christmas and New Year's Day holidays
likely contributed to the price declines as the shortened work weeks mitigated
industrial demand for natural gas. During the week from December 21 through
December 28, prices declined between $3.23 and $4.51 per MMBtu. Prices continued downward this past week
(December 28 through January 4), although the declines were considerably less
pronounced with decreases of no more than 81 cents at most market locations. As
a result of the mild temperatures mitigating heating demand for natural gas,
receipts of natural gas were significantly below nominations established during
the December bidweek (November 22 - 29), contributing to high linepack
conditions on many natural gas pipeline systems (See Other Market Trends). Natural gas production in the Gulf of Mexico continued to recover from
the hurricane damage suffered in 2005. The Minerals Management Service (MMS)
reported that shut-in natural gas production fell to 1.95 Bcf per day as of
Thursday, December 29, and cumulative shut-in production since August 26, 2005,
reached 561 Bcf, which is equivalent to about 11 percent of total U.S. natural
gas production for the period. The
lingering production shut-ins are likely contributing to the elevated price
levels, as prices at most market locations remain about $2 to $4 per MMBtu, or
more than 40 percent, above last year's level at this time. Prices at the Henry Hub on Wednesday, January
4, exceeded last year's level by $3.55 per MMBtu or about 62 percent. Nevertheless, since mid December, when the
price at the Henry Hub hit $15.40 per MMBtu, the prevailing trend on the spot
markets has been towards declining prices. During the nomination period for natural gas for January 2006 (December
23 - 28), bidweek prices increased by less than 2 percent at most market
locations, with the bidweek price climbing 22 cents relative to the preceding
month at the Henry Hub.
At the NYMEX, the price of the futures contract for
February delivery at the Henry Hub settled at $10.197 per MMBtu yesterday
(Wednesday, January 4), decreasing about $4.148 per MMBtu or about 29 percent
since Wednesday, December 21, and $1.44 per MMBtu since Wednesday, December
28. The price for the March 2006 futures
contract experienced similar declines over the same period. The 12-month
futures strip (February 2006 through January 2007) traded at a premium of $0.98
per MMBtu relative to the Henry Hub spot price, averaging $10.233 per MMBtu as
of Wednesday, January 4. The January
2006 futures contract closed at $11.431 per MMBtu on December 28, declining
about 31 cents or 3 percent since becoming the near-month contract on November
29. The futures contract prices for the
upcoming heating season months (February 2006 through March 2006) yesterday
continue to trade at significant premiums relative to the Henry Hub spot price
for futures prices, which will provide suppliers economic incentives to not
withdraw gas from storage.
Recent
Natural Gas Market Data
Estimated Average Wellhead Prices |
||||||
|
Jul-05 |
Aug-05 |
Sept-05 |
Oct-05 |
Nov-05 |
Dec-05 |
Price
($ per Mcf) |
6.69 |
7.68 |
9.76 |
10.97 |
9.54 |
10.02 |
Price
($ per MMBtu) |
6.51 |
7.48 |
9.50 |
10.68 |
9.29 |
9.76 |
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 2,641 Bcf as of Friday, December 30, 2005,
according to EIA's Weekly Natural Gas
Storage Report (See
Storage Figure). The implied net injection of 1 Bcf leaves storage levels 168 Bcf, or 6.8
percent, above the 5-year average, but 79 Bcf, or 2.9 percent, below the
storage level at this time last year. This is the first time in the 12-year history of the Weekly Natural Gas Storage Report Historical
Database that a net injection has occurred this late in the heating season,
and the first time since December 4, 1998, that an injection occurred in
December. This week's implied net change
sharply contrasts with the 5-year average net withdrawal of 135 Bcf, and last
year's net withdrawal of 155 Bcf. The
unusual injection likely resulted from much warmer-than-normal temperatures
across much of the United States during the report week, especially in major
population centers in the East and Midwest which account for much of the space
heating demand (See Temperature Maps). New England and the Middle Atlantic regions
experienced temperatures 24 percent and 27 percent warmer-than-normal,
respectively, as measured by the National Weather Service heating degree days
for the week ending December 29, 2005. Temperatures in the East and West North Central regions were about 29
and 36 percent, respectively, above average. Additional factors contributing to the net injection include reduced
industrial demand owing to the holiday-shortened work week, and the average
differential of roughly $1.45 per MMBtu between the Henry Hub spot price and
the prices for February and March futures contracts.
Other Market Trends:
Natural Gas Transportation Update:In the past
week, mild temperatures prompted several natural gas pipelines to take
precautionary measures to avoid imbalances on transportation systems. Both El Paso and Northwest urged shippers last
week to align supplies with their markets in order to avoid potential
penalties. Because recent nominations had been above takes, El Paso reported
that it was injecting maximum capacity at one of its storage facilities. Pacific Gas and Electric issued a systemwide
high-inventory operational flow order on Thursday, December 29, indicating low
demand in some markets.Mississippi
River Transmission also cited mild temperatures when it issued a warning on
December 31 that it would be unable to schedule volumes that resulted in a net
daily long imbalance position. The
warning was lifted on Wednesday, January 4.Other transportation developments during this report week include:
EIA Reports Strong Financial Results for Major Energy
Companies: Twenty-one of the nation's major energy
companies reported overall net income of $26 billion on revenues of $295.1
billion during the third quarter of 2005, according to information released by
the Energy Information Administration (EIA).(EIA defines major energy companies as ". . . U.S.-based publicly-owned
companies or U.S.-based subsidiaries of publicly-owned foreign companies that
had at least 1 percent of either production or reserves of oil or gas in the
United States, or 1 percent of either refining capacity or petroleum product
sales in the United States.") The 69
percent increase in net income in the third quarter of 2005 over the third
quarter of 2004 primarily resulted from higher crude oil and natural gas
prices, higher refining margins, higher foreign refinery throughput, and
slightly higher demand in the countries comprising the Organization for
Economic Cooperation and Development (OECD). The report (Financial
News for Major Energy Companies), prepared from data compiled
from the companies' press releases, attributes the significantly higher results
primarily to a 50 percent rise in natural gas wellhead prices and a 47 percent
increase in crude oil prices as measured by the refiner acquisition cost of
imported crude oil for the year. Worldwide
downstream natural gas and power earnings increased by 13 percent owing to a
variety of factors. However, higher feedstock costs and effects of hurricanes decreased earnings from
the majors' chemical operations. Earnings from the majors'
chemical operations were 56 percent lower in the third quarter of 2005 than a
year ago as eight of the nine companies reporting results for this line of
business recorded lower earnings, citing lower margins/higher feedstock costs,
higher utility costs, reduced sales volumes, and outages owing to Hurricanes
Katrina and Rita as reasons for the reductions.