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Overview:
Thursday, March 23 (next release 2:00 p.m. on March 30, 2006) Natural
gas spot prices showed relatively modest changes at most market locations in
the Lower 48 States since Wednesday, March 15, 2006. For the week (Wednesday – Wednesday, March 15
to 22), the spot price at the Henry Hub decreased by 3 cents, or less than one-half
percent, to $7.07 per MMBtu. The price
of the NYMEX futures contract for April delivery settled at $6.953 per MMBtu
yesterday (March 22), which is 19 cents, or about 3 percent, less than last
Wednesday. As of Friday, March 17, 2006,
natural gas in storage was 1,809 Bcf or 67 percent above the 5-year average. The spot price for West Texas Intermediate
(WTI) crude oil was $60.03 per barrel or $10.35 per MMBtu yesterday. This price is $2.08 per barrel less than the
price last week, a decrease of about 3 percent. Net
changes to spot prices were relatively small this week despite colder-than-normal
temperatures that ushered in the official start of spring. High storage inventories and a small decrease
in oil prices partly offset the upward pressure on prices from the cold weather
as most market locations reported price movements on the week of about 2
percent in either direction. The Henry
Hub spot price increased only 3 cents, or less than one-half percent, to finish
the week at $7.07 per MMBtu yesterday (March 22), which is slightly lower than
the price on the same date last year of $7.25 per MMBtu. Price decreases prevailed in almost all
western locations including the Rockies, California, Arizona, and Nevada where
prices declined about 11 cents on average for the week. Most other regions exhibited more mixed
trading with no clear overall trends.
The average spot price in the Northeast was $7.70 per MMBtu yesterday,
which is less than 1 percent lower than last Wednesday. Similarly, price movements in most producing
areas around the Gulf Coast were modest, with an average decrease of less than
1 percent. At
the NYMEX, the price of the futures contract for April delivery at the Henry
Hub decreased 19 cents or less than 3 percent to $6.953 per MMBtu since last
Wednesday, March 15. With about 1 week
until the April 2006 contract expires on March 29, the price is 37 cents or
about 5 percent below the expiration price of the April 2005 contract. Looking to the futures contracts over the
next 12 months, the prices for all contracts in the injection season months
(April – October) decreased slightly (about 2 percent on average), whereas the
contract prices for next year’s heating season months (November 2006 – March
2007) all increased slightly (about 1 percent on average). The heating season contracts settled at
$10.333 per MMBtu on average yesterday and remain about $2 per MMBtu higher on
average than the equivalent 2005 contracts at this time last year, reflecting
the continuing uncertainty about next summer’s and winter’s weather despite
high storage inventories. The 12-month
strip, which is the average of the monthly futures prices for the coming year,
decreased about 5 cents this week to settle at $8.627 yesterday. Recent
Natural Gas Market Data
Working
gas in storage was 1,809 Bcf, or 66.7 percent above the 5-year average as of
Friday, March 17, according to EIA’s Weekly
Natural Gas Storage Report (See Storage Figure). The implied net withdrawal of 23 Bcf is small
compared with the 5-year average withdrawal of 59 Bcf, yet characteristic of the
pattern during this year’s heating season, which has seen 15 out of 20 weekly
net withdrawals below the 5-year average.
Stock levels also exceed year-earlier levels by 506 Bcf or 38
percent. The below average weekly
withdrawal likely resulted in large part from spring-like temperatures across
the Eastern United States during the storage report week especially in southern
Census Divisions where temperatures were at least 47 percent above normal. Temperatures were 14 percent to 55 percent warmer-than-normal
in all Census Divisions except the Pacific and Mountain Divisions, as measured
by the National Weather Service heating degree days (HDDs) for the week ending
Thursday, March 16, 2006 (See Temperature Maps). This is in sharp contrast to the Western
United States, which was 25 and 54 percent colder-than-normal in the Pacific
and Mountain Divisions, respectively. If
net withdrawals for the next 2 weeks match the 5-year average, working gas in
storage will be 1,765 Bcf at the end of the heating season. This would be the largest inventory for this
time of year since 1991 when the level was 1,912 Bcf, and the sixth largest
inventory since 1976 when EIA began collecting monthly storage data. The record end-of-heating-season inventory
level during this time frame was in 1983 when storage levels were 2,148
Bcf. Other Market Trends: EIA Releases a Report on the Assumptions
to the Annual Energy Outlook 2006: On March 20, the Energy Information
Administration (EIA) released a report entitled Assumptions
to the Annual Energy Outlook 2006, which outlines the major
assumptions of the National Energy Modeling System (NEMS) used to generate the
projections in the Annual Energy Outlook
2006 (AEO2006). The report also
discusses general features of the model structure and key input data and
parameters that are most significant in formulating model results. The NEMS is
made up of several different modules. Some of the key assumptions in the demand
modules (residential, commercial, industrial, and transportation modules) are
the numbers of consumers, type and amount of natural gas consumed, as well as
their geographic distribution. The Oil and Gas Supply Module includes a number
of key assumptions, including estimates of remaining technically recoverable
resources, which are estimated to have been 1,304 trillion cubic feet (Tcf) for
the United States as of January 1, 2004.
Major categories within this total include lower 48 volumes of
undiscovered technically recoverable resources of 268.2 Tcf, inferred reserves
of 224.4 Tcf, and unconventional gas recovery resources of 469.9 Tcf, and U.S. proved
reserves of 189.0 Tcf. Additionally,
certain legislation and regulations are taken into account and incorporated
into the analysis. Appendix A of the report lists the Federal and selected
State legislation and regulations, gives a brief description, and describes how
these were handled in the AEO2006. The NCC Releases a New Study: The
Nation’s abundant coal resources and technological advances in recent years
have led to an increased interest in maximizing the use of coal. The National
Coal Council (NCC) released a study on Wednesday, March 22, titled Coal: America’s Energy Future, which
contains recommendations to the U.S. Secretary of Energy to make use of coal
for clean electricity generation, transportation fuels, and production of
synthetic natural gas, hydrogen, and ethanol over the next 20 years. The study
found that the additional use of coal would reduce U.S. energy costs by 33
percent and would result in an aggregate gain of more than $3 trillion in GDP.
Using coal to produce natural gas would ease supply pressures by providing an
alternative to about 15 percent of U.S. annual consumption, or 4 trillion cubic
feet (Tcf) per year of future consumption. The additional supply would moderate
natural gas prices and use an additional 340 million tons of coal per year.
Coal-generated natural gas could be used for home heating and all other
applications that use natural gas, including powering existing underutilized
combined cycle units. Natural gas production in the United States is projected
to peak in 2019, which, coupled with increasing demand, could lead to supply
and deliverability issues, higher prices and increasing dependence on foreign
sources. The year-long study was conducted by the NCC following a request by
the U.S. Secretary of Energy, Samuel Bodman. The Council identified eight
priority findings and developed a set of proposed policy, fiscal, and
legislative recommendations to address the findings. The Energy Information
Administration (EIA) projects that U.S. energy consumption will increase by 34
percent between 2004 and 2030, and the study asserts that coal is the only
domestic fuel that has the flexibility and reserve base to meet the increasing
demand, with enough reserves to last more than a century, even at elevated
levels of use. Natural Gas Transportation Update: ·
Mississippi River
Transmission Corp. (MRT) implemented a system protection warning (SPW) on
Friday, March 17 until further notice.
MRT cited forecasts of cold weather in its service area as the reason
for the warning. The company reported that daily short imbalances will not be
allowed for the duration of the SPW. ·
Texas Gas
Transmission (TGT) announced that capacity through the Sharon (Louisiana) Compressor
Station will be limited to 450,000 MMBtu per day through Friday, March 24,
because of station horsepower maintenance and installation. ·
East Tennessee
Natural Gas Co. announced on Monday, March 20, that it will require the
balancing of some Load Management (Market Area) Service (LMS-MA) contracts as a
result of system imbalances. The company will adjust its deliveries and
corresponding receipts at meters in the LMS-MA contracts to an appropriate
level based on the best available imbalance information. ·
Florida Gas
Transmission Co. declared an overage alert day on Tuesday, March 21, owing to
forecasts of warmer weather for central Florida and lower linepack. The company
set the tolerance for negative daily imbalance at 10 percent. ·
Pacific Gas &
Electric Co. issued a customer-specific low-inventory operational flow order
(OFO) for Wednesday, March 22. ·
El Paso Natural
Gas declared a force majeure on Monday, March 20, as a result of a compressor
failure at the Monument Station. According to the pipeline company, about 35
MMcf per day of capacity has been lost at four nearby points. The force majeure
will be in effect while repairs and maintenance are performed. | ||||||||||||||||||||||||||||||||||||||||||
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