for week ending October 11, 2006 | Release date: October 12, 2006 | Previous weeks
Overview: Thursday, October 12 (next release 2:00 p.m. on October 19, 2006)
Natural
gas spot prices increased sharply this week (Wednesday-Wednesday, October 4-11)
as colder temperatures crept into the Midwest. For the week, the price at the
Henry Hub increased $1.28 per MMBtu, or about 29 percent, to $5.65. At the New
York Mercantile Exchange (NYMEX), the price of the futures contract for
November delivery at the Henry Hub moved higher by about 16 cents per MMBtu to
settle yesterday (Wednesday, October 11) at $6.150. Natural gas in storage was 3,389 Bcf as of Friday, October 6, which is
11.8 percent higher than the 5-year average. The spot price for West
Texas Intermediate (WTI) crude oil decreased $1.97 per barrel, or about 3
percent, since last Wednesday (October 4) to trade yesterday at $57.56 per
barrel or $9.92 per MMBtu.
Spot price increases were widespread this week, with
prices at most reporting market locations outside of the Rockies increasing by
more than $1 per MMBtu. The Henry Hub price has risen in five of the past six trading
sessions, trading at the end of this report week at $5.65 per MMBtu, as autumn weather
sets in. This is the highest price for next-day delivery at the Henry Hub in more
than a month (since September 6). However, the spot price is still considerably
lower (about 60 percent) than it was this time last year, following the
devastating hurricane season. At this time last year the Henry Hub was just
coming back into service after Hurricane Rita struck, and the first price
quotes exceeded $13 per MMBtu. In contrast, this hurricane season, which does not
end officially until November 1, has yielded little, if any, interruption of
natural gas flows from the Gulf of Mexico. This is certainly one factor in what
was a trend of generally declining prices in September. However, that trend
reversed in early October with 2 straight weeks of price increases. Trading
locations in producing areas along the Gulf Coast this week registered
increases from $0.77 to $1.33 per MMBtu. In the Midwest, where low temperatures
were below freezing in some areas, the average price increased $1.33 per MMBtu
to $5.79. Although the unusually cold temperatures have not quite reached the
Northeast, prices in the region gained an average of $1.30 per MMBtu to an
average price of $6.02 as of Wednesday, October 11. The price for gas off Tennessee
Gas Pipeline in New England (Zone 6) increased $1.30 per MMBtu to $6.18, which
was the highest price in the country yesterday. In contrast to price trends in
the East, prices decreased at several market locations in the Rockies on the
week. The spot price at Opal, Wyoming, declined 28 cents per MMBtu on the week
to $3.74. Prices in California were higher on the week, albeit less so than in
the East. The price at the Southern California border increased $0.46 per
MMBtu, or 10 percent, to $5.03.
Estimated Average Wellhead Prices |
||||||
|
Apr-06 |
May-06 |
June-06 |
July-06 |
Aug-06 |
Sep-06 |
6.59 |
6.19 |
5.80 |
5.82 |
6.51 |
5.51 |
|
Price
($ per MMBtu) |
6.42 |
6.03 |
5.65 |
5.67 |
6.34 |
5.37 |
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 as of October 6 was 3,389 Bcf, which is 11.8 percent above the
5-year average inventory level for the report week, according to EIA's Weekly Natural Gas Storage Report (See Storage Figure).
The implied net injection of 62 Bcf for the report week was 5 percent less than
the 5-year average net injection of 65 Bcf and about 11 percent more than last year's
net injection of 56 Bcf. As a result, the difference between this year's stocks
and the 5-year average increased to 358 Bcf, and the difference between this
year's stock level and last year declined to 410 Bcf.This report week's net injection is the
lowest for the Lower 48 States since August 25, when cooling demand in key
market locations likely contributed to reduced net injections. This week's low
injection relative to recent weeks reflects heating demand picking up in parts
of the country, although temperatures as a whole were warmer than normal during
the report week (See Temperature Maps), according to heating degree-days as
measured by the National Weather Service. In its most recent short-term forecast, EIA has
projected that working gas in storage at the start of the winter heating season
(November 1) will be about 3,540 Bcf, which is about 360 Bcf above the 5-year
average yet below EIA's estimated maximum working gas storage capacity of about
3,600 Bcf. This week's working gas volume is the second highest yearly peak for
working gas in storage recorded by EIA. The largest volume of working gas in
storage to date is 3,472 Bcf, achieved at the end of November 1990.
EIA Releases
Its Winter Fuels Outlook: According to the Energy Information Administration's (EIA) latest Short-Term Energy Outlook (STEO), released on October 10, natural gas spot prices at
the Henry Hub are expected to average about $6.90 per thousand cubic feet (Mcf)
in 2006 and increase to $7.53 per Mcf in 2007. Total U.S. natural gas consumption in 2006 is expected to fall by about
250 billion cubic feet (Bcf) or about 1.1 percent below the 2005 level and then
increase by about 640 Bcf or almost 3 percent in 2007.The relatively low consumption in 2006
reflects a large drop-off in residential consumption, which is attributable
largely to the mild weather during the early months of 2006. During the start of this winter season on November
1, working gas in storage is expected to be about 3,540 Bcf, which is roughly
360 Bcf more then the 5-year average.This large inventory should mitigate upward pressure on natural gas
prices. Domestic dry natural gas
production in 2006 is expected to increase by 0.8 percent in both 2006 and in
2007, owing to continued high levels of drilling for natural gas prospects and
restored production capacity from the major disruptions caused by Hurricanes
Katrina and Rita in the Gulf of Mexico in 2005.Because of the lack of activity so far this hurricane season,
significant hurricane-induced losses are not likely this year. Included in this
month's STEO are, among other things, expected prices for petroleum products;
the baseline weather case for this winter; projection of heating expenditures
by residential customers relative to last winter; and a projection of prices
beyond the upcoming winter.