for week ending June 7, 2006 | Release date: June 8, 2006 | Previous weeks
Overview: Thursday, June 8 (next release 2:00 p.m. on June 15, 2006)
Continuing
moderate temperatures across much of the Lower 48 States, particularly in the eastern
half of the country, helped lower natural gas spot and futures prices during the
week (Wednesday to Wednesday, May 31 - June 7). The spot price at the Henry Hub decreased by $0.15 per
MMBtu, or about 2.5 percent,
for the week, to $5.82 in yesterday's (Wednesday, June 7) trading.At the New York Mercantile Exchange (NYMEX), the
price of the futures contract for July delivery moved lower by 41 cents per
MMBtu compared with its settlement price a week ago, ending yesterday at $5.974
per MMBtu. The
Energy Information Administration (EIA) reported that natural gas inventories in
underground storage were an estimated 2,320 Bcf as of
Friday, June 2, which is 41.3 percent greater than the previous 5-year average.
The spot price for West Texas
Intermediate (WTI) crude oil decreased by $0.52 per barrel, or less than 1
percent on the week, bringing the WTI spot price in yesterday's trading to $70.90
per barrel, or $12.22 per MMBtu.
Mild temperatures again prevailed over much of the country
during most of the report week. As a result, spot prices decreased at most
market locations, although prices increased at markets in the western half of
the country as warmer weather moved into the Southwest and California on Monday.
Despite increasing $0.44 per MMBtu by Monday, with the generally seasonal
temperatures and perceived ample supplies in storage for this time of year, the
Henry Hub spot price fell below the $6-mark again yesterday, averaging $5.82
per MMBtu, which was 15 cents lower on the week. Even as this year's hurricane
season officially began on June 1, shut-ins in the Federal offshore Gulf of
Mexico from last year's hurricane season continue to exceed 1 Bcf a day,
bringing the total lost production to nearly 785 Bcf, according to the Minerals
Management Service (MMS). However, the lost supplies are not reflected in the current
ample storage levels, as storage operators such as Tennessee Gas Pipeline Co.
and Southern Natural Gas Co. already are notifying customers that the current
pace of injections and the high inventories following the warm winter could
lead to restrictions in interruptible storage services. The largest price
decreases this week were in the Northeast, where the spot price for delivery in
Transcontinental Gas Pipe Line Corp.'s Zone 5 (the Mid-Atlantic) recorded the
highest weekly decrease in the Nation, falling $0.70 per MMBtu
to $6.10. Overall in the Northeast, the average
spot price dropped 35 cents per MMBtu to $6.18. Week-on-week price increases
were recorded in the California, Rockies, and Southwest regions, chiefly the
result of a hot spell beginning Tuesday. During trading on Monday for next-day
delivery, the Southern California border price was up 56 cents after the local
utility ended a 12-day run of high-linepack operational flow orders. On the
week the Southern California Border price rose 26 cents per MMBtu, or about 5
percent, to $5.54.
At
the NYMEX, the price of the futures contract for July decreased 41 cents, or
about 6 percent on the week, settling at $5.974 yesterday (June 7), the
contract's first settlement below $6 since January 21, 2005. Similarly, the
August 2006 futures contract decreased on the week, settling yesterday at
$6.249 per MMBtu, which was 37.2 cents lower than last Wednesday (May 31). The
price of contracts for delivery through November 2006 all decreased (by an
average of 23.7 cents on the week), while contracts for delivery during the
other months of next winter (December 2006 - March 2007) increased by an average
of 10 cents. The historically high prices of futures contracts next winter
likely reflect market concerns about potential hurricane-related supply
disruptions or warmer-than-normal temperatures during the upcoming summer despite
current high storage levels relative to normal. The February 2007 contract is the
highest priced contract over the next 12 months, settling yesterday at $10.229
per MMBtu, reflecting a $4.41 per MMBtu premium over the current Henry Hub spot
price.
Recent Natural Gas Market Data
Estimated Average Wellhead Prices |
||||||
|
Dec-05 |
Jan-06 |
Feb-06 |
Mar-06 |
Apr-06 |
May-06 |
10.02 |
8.66 |
7.28 |
6.52 |
6.59 |
6.19 |
|
Price
($ 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 in underground storage as of Friday, June 2, was 2,320 Bcf, according to
EIA's Weekly Natural Gas Storage Report (See Storage Figure). The implied net injection was 77 Bcf,
significantly lower than the 5-year average net injection of 105 Bcf and last
year's difference of 102 Bcf for the report week. The net injection,
which was the lowest since the week ending April 28, marks the third week in a
row that injections fell short of the 5-year average. Despite the relatively low net injection, storage levels remain 41.3
percent above the 5-year average of 1,642 Bcf and 24.2 percent above last
year's level of 1,868 Bcf.Further,
the differential of the current storage volume relative to the 5-year average is
678 Bcf after ending the heating season (March 31) at 654 Bcf, indicating that
cumulative additions to storage have been above average since then. As measured
by cooling degree days (CDDs) published by the National Weather Service,
temperatures were warmer than normal in all Census Divisions but the Pacific,
although deviations in many areas perhaps were not significant enough to have caused
much weather-related demand. (See Temperature Maps).
Other Market Trends:
EIA Releases
Its June Short-Term
Energy Outlook:According to the Energy
Information Administration's (EIA) latest Short
Term Energy Outlook (STEO), released on June 6, natural gas spot prices at the
Henry Hub in 2006 are expected to average $7.95 per MMBtu, or 12.6 percent less
than the $9.10 average in 2005. Spot prices are expected to decline below $7.19
per MMBtu over the next few months, partly as a result of weak heating-related
demand this winter and the resulting high levels of natural gas in storage.
Total U.S. natural gas demand in 2006 is expected to fall about 0.2 trillion
cubic feet (Tcf) or 0.9 percent below the 2005 level and then increase by about
0.8 Tcf or 3.8 percent in 2007. Domestic
dry natural gas production in 2005 is estimated to have declined by 2.7
percent, mainly because of the hurricane-induced supply disruptions in the Gulf
of Mexico, but it is projected to increase by 0.7 percent in 2006 and 1.2
percent in 2007. Some production still remains shut-in as a result of damage
from hurricanes Katrina and Rita last year. According to the Minerals Management Service, an estimated 784.5 billion
cubic feet or 19.7 percent of natural gas production from Federal offshore
fields had been lost as of June 1. Katrina and Rita also damaged 457 pipelines and numerous refineries and
natural gas processing plants. The June STEO also includes a special report, The
Impact of Tropical Cyclones on Gulf of Mexico Crude Oil and Natural Gas
Production, on the history of tropical storm and hurricane
activity in the Gulf of Mexico and its impact on crude oil and natural gas
production since 1960. Locations of
future storms are unpredictable, but given the very active hurricane season
predicted by the National Oceanic and Atmospheric Administration, EIA estimates
that shut-in natural gas production in the Federal Outer Continental Shelf this
hurricane season could reach 206 Bcf.
Natural Gas Transportation Update: