for week ending May 31, 2006 | Release date: June 1, 2006 | Previous weeks
Overview: Thursday, June 1 (next release 2:00 p.m. on June 8, 2006)
Natural
gas spot prices were virtually unchanged at most market locations in the Lower
48 States during the holiday-shortened trading week (Wednesday to Wednesday,
May 24-31), while futures prices increased. The spot price at the Henry Hub
decreased by 4 cents per MMBtu on the week, or less than 1 percent, to $5.97
per MMBtu. On the New York Mercantile
Exchange (NYMEX), the June contract expired at $5.925 per MMBtu on May 26,
marking the lowest contract closing price since the October 2004 futures contract
closed at $5.723 per MMBtu. The settlement price for the futures contract for
July delivery at the Henry Hub increased 21 cents on the week, settling
yesterday (May 31) at $6.384 per MMBtu. EIA reported that inventories of working gas in underground storage were
2,243 Bcf as of Friday, May 26, which is 45.9 percent higher than the 5-year
average. The spot price for West Texas
Intermediate (WTI) crude oil gained $1.95 per barrel, or about 3 percent, since
last Wednesday (May 24), trading yesterday at $71.42 per barrel ($12.31 per
MMBtu).
The
widespread price increases in Tuesday's and Wednesday's trading were sufficient
to roughly offset the price declines of last Thursday and Friday (May
25-26). Prices declined on Thursday and
Friday owing to anticipated soft industrial load over the Memorial Day holiday
weekend and mild weather trends. The return of industrial demand to more normal
levels after the holiday weekend and higher temperatures across much of the
Lower 48 States put upward pressure on prices on Tuesday (May 30), leading to
an increase of as much as $1.19 cents in the Northeast and 88 cents in Florida,
with the increases temporarily spreading into upstream market locations in East
and West Texas as well. On the week, however, spot prices were virtually
unchanged at most market locations in the Lower 48 States, varying by no more
than a nickel since last Wednesday. A few locations in the Rocky Mountain and
California regions recorded higher increases, including those in the
Arizona/Nevada region, where the price at the El Paso North Baja trading
location increased 46 cents, or almost 9 percent on the week, to $5.60 per
MMBtu. Only three market locations,
including the Southern California Border Average, increased by more than 20
cents per MMBtu. Several trading locations ranging from the western Great Lakes
region down to Louisiana recorded small price decreases on the week, but prices
in the East and South Texas regions decreased by up to 30 cents or about 5
percent on the week.
At
the NYMEX, the futures contract for June delivery expired on Friday, May 26, at
$5.925 per MMBtu, which is the lowest expiration price for a near-month
contract since September 28, 2004, when the October 2004 contract expired at
$5.723 per MMBtu. The June contract's expiration price is about 13 percent lower
than its settlement price of $6.805 at the beginning of its tenure as the
near-month contract on April 27, and about 3 percent lower than the expiration
price of the June 2005 contract ($6.123). The July 2006 contract finished its
first day of trading as the near-month contract at $6.123 per MMBtu on May 30.
Overall, the July 2006 futures contract gained 21 cents, or about 3 percent on
the week. Similarly, the August 2006 futures contract increased on the week,
settling yesterday at $6.621 per MMBtu, 22 cents higher than last Wednesday
(May 24). The price of contracts for delivery through November 2006 increased
by an average of 18 cents on the week, or nearly 3 percent, while remaining
contracts for delivery during the next heating season (December 2006 - March
2007) decreased by an average of 23 cents, or 2.3 percent. The increases in
prices of futures contracts on the week likely reflect market expectations of
possible hurricane-related supply disruptions as well as recent forecasts of
warmer-than-normal temperatures during the upcoming summer. Today's start of
the traditional hurricane season (June 1 - November 30) follows a number of
forecasts that predict above normal storm activity, as tropical Atlantic Ocean
temperatures remain warmer than normal. However, since La Nina conditions seem
to have eased, the current season is expected to be less active than the 2005
Atlantic hurricane season. The February 2006 contract still remains the highest
priced contract over the next 12 months, settling yesterday at $10.096 per
MMBtu, reflecting a $4.13 per MMBtu premium over the current Henry Hub spot
price. Other 2006-2007 heating season contracts were trading yesterday at an
average premium of $3.51 per MMBtu to the Henry Hub spot price.
Recent Natural Gas Market Data
Estimated Average Wellhead Prices |
||||||
|
Dec-05 |
Jan-06 |
Feb-06 |
Mar-06 |
Apr-06 |
May-06 |
10.02 |
8.66 |
7.28 |
6.52 |
6.59 |
6.19 |
|
Price
($ per MMBtu) |
9.76 |
8.43 |
7.09 |
6.35 |
6.42 |
6.02 |
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 inventories were 2,243 Bcf as of Friday, May 26, with implied net
injections of 80 Bcf, according to EIA's Weekly
Natural Gas Storage Report (See Storage Figure). This leaves storage levels 45.9 percent above the 5-year average for
this week and 27.0 percent above last year's level of 1,766 Bcf.The net injection is 10 Bcf or 11
percent lower than the 5-year average injection of 90 Bcf for this week and
marks the second week in a row that injections fell short of the 5-year
average. However, net additions to
storage have exceeded the 5-year average in 5 out of 8 weeks since the
beginning of the non-heating season (April through October 2006), and the
differential of the current storage volume relative to the 5-year average has
increased from 654 Bcf to 706 Bcf since March 31. Overall, moderate temperatures prevailed in
the Lower 48 States during the week ended May 25, contributing to the robust
net additions to storage. As measured by heating degree days (HDDs) and cooling degree days (CDDs)
published by the National Weather Service, temperatures were not significant
enough to cause much weather-related demand. (See Temperature
Maps)
Other Market Trends:
Federal Agencies Announce Preparations
for Hurricane Season: The U.S. Department of Energy (DOE) and the U.S.
Department of the Interior's Minerals Management Service (MMS), which both play
important roles in managing oil and gas resources in the United States,
announced on May 30 preparedness measures for the upcoming hurricane
season. DOE's Office of Electricity
Delivery and Energy Reliability outlined ways that the Department has enhanced
its hurricane response system since the hurricanes of 2005, which caused
extensive damage to oil and gas production in the Gulf of Mexico. The measures include:increasing the number of trained response
personnel to more than 70, reviewing best practices and lessons learned,
updating the hurricane modeling system for DOE's Visualization Room, working
with States to improve their energy assurance plans, and implementing a
toll-free hotline to improve communications among industry and State, local,
and Federal representatives. MMS
announced that it has implemented several improvements to its oversight system,
including pre-season communications planning with DOE and the U.S. Coast Guard,
coordination with industry to improve safety practices and technology on
offshore facilities, and improvements to the electronic hurricane reporting
system. The hurricane season begins on
June 1 and lasts until November 30. According to a recent report from the National Oceanic and Atmospheric
Administration, the 2006 Atlantic hurricane season is expected to be very
active, but fewer storms are predicted than during last year's record-breaking
season.
Natural Gas Transportation Update: