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Overview: Thursday, March 30 (next release 2:00 p.m. on April 6, 2006)
Since Wednesday, March 22, natural gas spot prices decreased at most market locations in the Lower 48 States, with declines of up to 38 cents per MMBtu. On Wednesday, March 29, the spot price at the Henry Hub averaged $7.16 per MMBtu, climbing about 9 cents per MMBtu or about 1 percent during the week (Wednesday–Wednesday). The futures contract for April delivery at the Henry Hub settled at $7.233 per MMBtu yesterday (March 29), gaining about 28 cents per MMBtu or about 4 percent since the previous Wednesday. Natural gas in storage was 1,705 Bcf as of March 24, which is about 62 percent above the 5-year average. Since March 22, the spot price for West Texas Intermediate (WTI) crude oil increased $5.97 per barrel, or about 10 percent to $66.00 per barrel or $11.379 per MMBtu.
Natural gas prices decreased by less than 38 cents per MMBtu at most market locations in the Lower 48 States as temperatures moderated following the weekend. At the same time, some market locations managed to post gains of up to 24 cents or 2 percent since last Wednesday, March 22. Despite large potential market supplies with storage over 62 percent above the 5-year average, the general price level in the natural gas market has shown surprising resilience over the past few weeks. After an extended price decline since mid December, spot prices reversed trend in early March, but generally have been retreating since last Wednesday, March 22. The spot price for natural gas at the Henry Hub bottomed out at $6.31 per MMBtu on March 9, then increased to $7.43 on March 24 before declining to $7.16 yesterday (March 29). The largest declines occurred in the Northeast region, where prices at the Transcontinental Zone 6 delivery points serving New York City and the Middle Atlantic States fell more than 30 cents. Prices at selected market locations in the Midcontinent, Rocky Mountains, Alabama, and West Texas regions also declined by 20-30 cents since last Wednesday. Meanwhile prices in California remained essentially unchanged on average since last Wednesday, March 22. Markets posting gains since last Wednesday included the Houston Ship Channel, which climbed nearly 4 percent or about 24 cents per MMBtu. Most of the increases at other markets were less than a dime. At $7.16 per MMBtu, prices at the Henry Hub as of Wednesday, March 29, were 22 cents, or about 3 percent above last year’s level.
At the NYMEX, the price of the futures contract for April delivery at the Henry Hub expired at $7.233 per MMBtu yesterday (March 29), increasing about 28 cents per MMBtu or about 4 percent since Wednesday, March 22, and about 44 cents per MMBtu or nearly 7 percent since becoming the near-month contract on February 27. The 12-month futures strip (April 2006 through March 2007) traded at a premium of $1.76 per MMBtu relative to the Henry Hub spot price, averaging about $8.92 per MMBtu as of Wednesday, March 29, with contracts ranging between $7.23 and $11.03 per MMBtu.
Recent Natural Gas Market Data
Working gas in storage decreased to 1,705 Bcf as of Friday, March 24, 2006, according to EIA’s Weekly Natural Gas Storage Report (See Storage Figure). Storage levels are 651 Bcf, or 62 percent, above the 5-year average, and 459 Bcf, or 37 percent, above the storage level at this time last year. The implied net withdrawal of 104 Bcf was more than three times as much as the 5-year average net withdrawal of 30 Bcf, and nearly twice as much as last year’s net withdrawal of 56 Bcf. This week’s net withdrawal is the third largest of 2006. Nevertheless, this is the first time in 4 weeks that the net withdrawal has exceeded the 5-year average. The relatively large withdrawal likely resulted from temperatures that were more than 18 percent colder-than-normal in each of the nine Census Divisions in the Lower 48 States during the report week (See Temperature Maps). Heating degree days along the northern tier showed the smallest deviations from normal as New England, the Middle Atlantic, and East and West North Central Divisions experienced temperatures that were 18, 23, 23, and 24 percent colder-than-normal, respectively, as measured by the National Weather Service heating degree days for the week ending March 23, 2006. Heating degree days in the East and West South Central Divisions were about 44 and 48 percent, respectively, above average. Overall, heating degree days were 26 percent above normal for the Lower 48 States. Despite the relatively large net withdrawal, only 1,489 Bcf has been withdrawn from storage since the beginning of the heating season on November 1. If withdrawals from storage over the last week of the heating season match the 5-year average, then cumulative net withdrawals for the heating season will be about 1,503 Bcf. This is about 26 percent below the 5-year average withdrawal of 2,018 Bcf, and the smallest cumulative seasonal withdrawal since the 1989-1990 heating season.
Other Market Trends:
Natural Gas Rig Count Near Record Levels: Rigs drilling for natural gas were 1,314 for the week ending March 24, 2006, according to Baker-Hughes Incorporated. Natural gas drilling rigs in the beginning of February exceeded 1,300 for the first time ever, and they have remained above 1,300 with the exception of 2 weeks in mid-March. The monthly averages for natural gas drilling rigs for February and March exceeded 1,300 rigs, which is more than double the monthly average for April 2002. U.S. total rigs drilling reached a record high of 1,571 for the week ending March 24, 2006, and have remained above 1,500 since the beginning of February. Natural gas drilling made up 84 percent of the total rigs drilling during the week.
Natural Gas Transportation Update:
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