Overview:
Thursday, November 30 (next release 2:00 p.m. on December 7, 2006)
Natural
gas spot prices increased at nearly all market locations in the Lower 48 States
since Wednesday, November 22, 2006, with some Midcontinent and Western regions showing
increases of more than $2 per MMBtu. With
only 3 trading days included in the report week owing to the Thanksgiving
holiday, the spot price at the Henry Hub increased by 34 cents, or about 5 percent,
to $7.75 per MMBtu. The price of the
NYMEX futures contract for January delivery settled at $8.871 per MMBtu
yesterday (November 29), which is 77 cents, or about 10 percent, more than last
Wednesday, and the December 2006 contract expired Tuesday at $8.318 per
MMBtu. As of Friday, November 24, 2006,
natural gas in storage was 3,417 Bcf or 7.2 percent above the 5-year average. The spot price for West Texas Intermediate
(WTI) crude oil rose to $62.45 per barrel or $10.77 per MMBtu yesterday. This price is $5.17 per barrel, or 9 percent,
more than the price last week and is the highest price since late September.
Although
natural gas spot prices rose in almost all market locations this week, shifting
weather patterns across the Lower 48 States created wide price variations among
the regions. Moderate temperatures in
the Midcontinent and the West last week were replaced by winter-like conditions
after the Thanksgiving holiday, which spurred an increase in heating
demand. West Texas, the Midcontinent,
and the Rockies, which recorded price decreases of more than $1 per MMBtu at
many locations last Wednesday (November 22), also saw gains since then ranging as
high as $2.95 per MMBtu. Average
increases per MMBtu in these regions were $2.21 (West Texas), $2.07
(Midcontinent), and $2.04 (Rocky Mountains) since last Wednesday. Anticipation of similar cold temperatures,
which are expected to reach the South and Northeast by the end of this week,
likely placed upward pressure on other market prices as well. The price at the Henry Hub was $7.75 per
MMBtu yesterday, which is an increase of 34 cents, or 5 percent, since last
Wednesday. Prices in the Northeast,
which averaged $7.96 per MMBtu yesterday, showed the smallest gains ranging
between 2 cents and 25 cents per MMBtu for the week. Besides increased heating demand, increasing
crude oil prices and transportation constraints may have contributed to the
upward pressure on prices. The WTI
increased by more than $5 to $62.45 per barrel during this report week after
falling to $55.90, which was the lowest price since June 2005, during the
previous week. Also, announcements of strained
operating conditions and overrun entitlements in the Northwest alerted
customers to potential supply constraints on pipelines in this region (see
Transportation Update).
The
price of the New York Mercantile Exchange (NYMEX) futures contract for January 2007
delivery at the Henry Hub settled at $8.871 per MMBtu yesterday in its first
day of trading as the near-month contract.
Despite no trading on Thursday and Friday of last week because of the
Thanksgiving holiday, the price consistently increased on each trading day this
week, settling about 77 cents, or 10 percent, higher on the week (Wednesday –
Wednesday, November 22-29). The December
2006 futures contract expired on Tuesday, November 28, at $8.318 per MMBtu, which
is the highest price for this contract during its term as the near-month
contract. The expiration price is 60
cents higher than the price last Wednesday and 90 cents higher than the price
on October 30 when it became the near-month contract. The remaining two contracts of the current
heating season, February and March 2007, had price increases similar to the
January contract and settled at $8.90 per MMBtu and $8.73 per MMBtu,
respectively. These are the highest
prices for both these contracts since mid-September. The prices of the NYMEX futures contracts for
the current heating season continue to exceed the Henry Hub spot price by $1.21
(January 2007), $1.15 (February 2007), and 98 cents per MMBtu (March
2007). Looking forward over the next
year, the 12-month strip increased 53 cents since last Wednesday, to $8.65 per
MMBtu, which holds a 90-cent premium over the Henry Hub spot price.
Recent Natural Gas Market Data
Estimated Average Wellhead Prices |
||||||
|
May-06 |
June-06 |
July-06 |
Aug-06 |
Sep-06 |
Oct-06 |
6.19 |
5.80 |
5.82 |
6.51 |
5.51 |
5.03 |
|
Price
($ per MMBtu) |
6.03 |
5.65 |
5.67 |
6.34 |
5.37 |
4.90 |
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 decreased to 3,417 Bcf as of Friday, November 24, which is 7.2
percent above the 5-year average according to the EIA Weekly Natural Gas Storage Report (See Storage Figure). The implied net withdrawal during the week
was 32 Bcf, which is 10 Bcf more than the 5-year average withdrawal for this
week, but 11 Bcf less than last year’s withdrawal of 43 Bcf. It is the third and largest withdrawal in the
4 weeks since the heating season began. By
comparison, the first withdrawal of the season was reported this week last year. However, since storage inventories have been
high this year and the recent withdrawals have been relatively modest, storage
levels continue to remain notably above the past year’s level and the 5-year
average. The difference between the
current inventory level and the 5-year average decreased to 230 Bcf this week,
which is the smallest margin of this kind since the week ending December 30,
2005. Stock levels also exceed
year-earlier levels by 185 Bcf, or about 5.7 percent. On a regional basis, the West region recorded
an injection of 1 Bcf, while the East and Producing regions withdrew 28 and 5
Bcf, respectively. Temperatures across the country likely contributed to the
regional pattern this week as the Mountain and Pacific Census Divisions were
more than 30 percent warmer than normal for the week ending November 23, as
measured by the National Weather Service’s heating degree-days (See
Temperature Maps). The
Lower 48 States were about 7 percent warmer than normal, while the South
Atlantic and South Central Census Divisions were 12 to 34 percent colder than normal.
Other Market Trends:
EIA Publishes the Natural Gas Annual
2005: The Energy Information
Administration (EIA) on November 16, 2006, published the Natural
Gas Annual 2005 (NGA2005), which provides comprehensive
information on the supply and disposition of natural gas in the United States.
According to the NGA2005, the national average wellhead price for natural gas
in 2005 was $7.33 per thousand cubic feet (Mcf), 34
percent higher than the 2004 average of $5.46 per Mcf. Recorded U.S. marketed
production was 18.95 trillion cubic feet (Tcf), which
was about 2.9 percent below the level in 2004.
A key factor reducing marketed production in 2005 was the production
shut-ins caused by Hurricanes Rita and Katrina at the end of summer 2005. Total natural gas imports increased in 2005
by almost 2 percent to 4.3 Tcf. Overall,
prices were higher, but supplies and consumption decreased from the previous
year’s levels. The NGA2005 also includes
data for production, transmission, storage, deliveries, and price by State for
2005, as well as summary statistics for each State for 2001 through 2005.
NOAA Publishes Its Final Forecast for the 2006-2007
Winter: The National Oceanic and Atmospheric
Administration (NOAA) published its final forecast for the upcoming winter on
November 16, 2006, reiterating that the 2006-2007 winter is expected to be
warmer than normal, although not as warm as the 2005-2006 winter. NOAA's
heating degree-day (HDD) forecast for December, January, and February reflects
weather that will be 2 percent warmer than the 30-year (1971-2000) average, but
about 9 percent cooler than last year. An
El Nino event continues to develop in the equatorial Pacific and is likely to
continue into the spring of 2007. NOAA
expects warmer-than-average temperatures across the Pacific Northwest, the
northern and central plains, the Midwest, the Northeast, northern mid-Atlantic,
as well as most of Alaska during December 2006 through February 2007.
Near-average temperatures are projected for parts of the Southeast from
Louisiana through North Carolina, while below-average temperatures are
anticipated for Hawaii. Parts of the mid-Atlantic, the Tennessee Valley, the
Southwest from Texas to California, and the intermountain West have equal
chances of warmer, cooler, or near-normal temperatures this winter. Overall, this winter is expected to be milder
than the average winter across much of the North, with fewer arctic air
outbreaks.
BLM Releases Study of Onshore Oil and
Natural Gas Resources: The Bureau of Land Management (BLM) released a report
on November 28, 2006, titled Scientific
Inventory of Onshore Federal Lands’ Oil and Gas Resources and the Extent and Nature
of Restrictions or Impediments to Their Development. The report, which was congressionally
mandated by the Energy Policy Act of 2005, presents inventory estimates of 11
U.S. Federal onshore basins and the limitations on their development. According to the report, the inventoried area
contains 187 trillion cubic feet of natural gas and 21 billion barrels of oil,
which represents 76 percent of onshore Federal oil and natural gas resources. Of this amount, 27 percent of the natural gas
and 51 percent of the oil are closed to leasing. Under standard lease terms, 13 percent of the
natural gas and 3 percent of the oil are accessible, and 60 percent of the
natural gas and 46 percent of the oil are accessible subject to certain restrictions. The current report differs in two ways from a
similar publication released in 2003.
First, BLM added six new oil and natural gas basins in Alaska, the Rocky
Mountain West, and the East to the five basins previously studied. The new area is equal to 99 million acres of
Federal land. Also, restrictions on the
drilling permits were considered in this study.
Previously, only restrictions on the actual leases were included in the
accessibility estimates.
Natural Gas Transportation Update: