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Home > Natural Gas > Natural Gas Weekly Update |
Overview: Thursday, February 1, 2007 (next release 2:00
p.m. on February 8, 2007) Since Wednesday, January 24, natural gas spot prices
have increased at most market locations in the Lower 48 States, with increases
ranging between 9 and 60 cents per MMBtu or about 1.1 to 8.4 percent at most
markets. On Wednesday, January 31,
prices at the Henry Hub averaged $7.75 per MMBtu, reflecting an increase of 29
cents per MMBtu or about 4 percent since Wednesday, January 24. The futures contract for February delivery at
the Henry Hub closed at $6.917 per MMBtu on Monday, January 29, decreasing
about 50 cents per MMBtu since Wednesday, January 24. By yesterday, (January 31), the futures
contract for March 2007 delivery at the Henry Hub increased about 29 cents per
MMBtu or about 4 percent since Wednesday, January 24. Natural gas in storage was 2,571 Bcf as of
January 26, which is about 21 percent above the 5-year average. The spot price for West Texas Intermediate
(WTI) crude oil increased $3.93 per barrel, or 7.3 percent to $58.17 per barrel
or $10.03 per MMBtu. This week’s WTI price change was the highest week-on-week
increase since the week ended November 29, 2006, when crude oil increased $5.17
per barrel or $0.89 per MMBtu. Despite this week’s relatively high increase,
crude oil prices remain about 14.3 percent lower than a year ago. Natural gas prices have increased at most market
locations since Wednesday, January 24, with the exception of a few pricing
points in the Northeast region. Continued strong space heating demand this
week, along with the higher crude oil prices likely contributed to the increase
in natural gas prices. The highest price increases in the Lower 48 States since
January 24 occurred principally in the Midcontinent region, where prices
climbed about 45 cents per MMBtu or about 6 percent on average. West of the
Midcontinent region (Rocky Mountains, Arizona/Nevada, and California), average
price increases on the week were smaller, ranging between 22 and 27 cents per
MMBtu. In the producing regions along the Gulf of Mexico, prices increased
between 27 and 43 cents, reflecting the increasing demand across the country.
The only region to record decreases this week was the Northeast, where a few
market locations recorded exceptionally high prices on Wednesday last
week. After prices at the New York
citygate (Transco Zone 6 New York) reached $20.07 per MMBtu on Wednesday, they
increased again on Thursday, January 25, to $24.93 per MMBtu, which was the
highest price for this location since the January 20, 2005, price of $29.14 per
MMBtu. The New York citygate price decreased substantially thereafter, with a
net decline of $10.65 on the week, which is about 53 percent of the price on
Wednesday, January 24. The New York
citygate still remained the highest-priced location in the Lower 48 States. The
Algonquin citygate price decreased $4.94 per MMBtu since last Wednesday, to an
average of $9.03 per MMBtu. Overall, prices in Northeast markets decreased
between $0.17 and $10.65 per MMBtu on the week. Despite the significant
decreases in the region, spot prices in the Northeast remain the highest in the
Lower 48 States, averaging $8.57 per MMBtu yesterday (January 31). According to
preliminary data, during the nomination period for natural gas for February
2007 (January 24 to 31), bidweek prices increased by more than 35 percent at
the New York citygate, with the bidweek price at the Henry Hub rising to an
average of $7.05 per MMBtu, which is an increase of $1.21 or about 21 percent
relative to the preceding month. At the NYMEX, the price of the futures contract for
February delivery at the Henry Hub closed at $6.917 per MMBtu on Monday,
January 29, increasing about $0.669 per MMBtu, or about 11 percent since its
first day of trading as the near-month contract on December 28. Since January
24, the March 2007 futures contract increased about 29 cents per MMBtu or 4
percent to settle yesterday at $7.667 per MMBtu. Correspondingly, the April
2007 futures contract settled yesterday at $7.655 per MMBtu, representing an
overall gain on the week (Wednesday to Wednesday) of about 34 cents or 5
percent. Contract prices for delivery through the end of 2007 all increased by
an average of 34 cents, with highest increase recorded for the October 2007
contract of $0.372 or 4.8 percent. The 12-month futures strip (March 2007 –
February 2008) ended trading yesterday $0.328 per MMBtu higher on the week from
its January 24 price of $7.900 per MMBtu. The 12-month futures strip traded at
a premium of $0.478 per MMBtu relative to the Henry Hub spot price, averaging
$8.228 per MMBtu as of Wednesday, January 31.
Recent Natural Gas Market Data
Working gas in storage decreased to 2,571 Bcf as of
Friday, January 26, 2007, according to EIA’s Weekly Natural Gas Storage Report (See Storage Figure).
Storage levels were 454 Bcf, or 21.4 percent, above the 5-year average, and 152
Bcf, or 6.3 percent, above the storage level at this time last year. Working gas in storage also exceeded the
5-year (2002-2006) maximum by 152 Bcf.
This week’s implied net withdrawal of 186 Bcf is about 11 percent higher
than the 5-year average net withdrawal of 168 Bcf, and is significantly higher
than last year’s net withdrawal of 87 Bcf.
The above-average net withdrawal likely resulted from continuing cold
temperatures across much of the United States, as well as the spot price
levels, both of which served as an incentive to withdraw natural gas from
underground storage. In daily trading from January 19 to January 25, spot
prices relative to the prices for near-month delivery contracts on the NYMEX
went from strong contango, with spot prices almost 50 cents below the
near-month NYMEX contract, to backwardation, in which spot prices were roughly
29 cents above the near-month contract price.
As the relative value of natural gas in the future declined, holders of
gas in storage have an economic incentive to rely more on gas from storage. For the week ended January 25, temperatures
in the entire Lower 48 States were only slightly colder than normal as measured
by National Weather Service heating degree-days (HDD) (See Temperature
Maps). However, temperatures for the week were 4 percent colder
than the previous week and 31 percent colder than last year. Temperatures in
the Census Divisions along the Atlantic coast (New England, Mid Atlantic, and
South Atlantic) were up to 4 percent colder than normal. The West South
Central, Mountain, and Pacific Census Divisions all experienced temperatures
that were much below normal. Other Market
Trends: Federal Register Notice Issued for Proposed New EIA Standby
Survey: The EIA proposed a new
survey that will collect information on the status and operations of natural
gas processing plants for use during periods of supply disruptions in areas
affected by an emergency. The notice of
the proposed collection, which appeared in the Federal Register on Tuesday, January 30, 2007, seeks to solicit
comments on the proposed form, “Survey of Natural Gas Processing Plants.” The form will consist of two schedules: Schedule A is the “Baseline Report,” which
will contain plant characteristics and will be collected at least once from all
processing plants, and Schedule B is the “Emergency Status Report,” which will
contain operational information and will only be activated during an emergency
situation. The activation, selection of
respondents, and frequency of Schedule B will be determined based on the
location and severity of the supply disruption.
Information collected will include plant characteristics, operation
capacity and utilization rates, operating constraints, and restoration
timeframes. The information will be
collected by phone, fax, or email and will be used to monitor energy supply in
the affected area. The Federal
Register notice asks interested
parties to comment on the proposal by April 2, 2007, and provides general
guidelines and issues to assist in preparing comments. EIA Is Soliciting Comments on Revisions to the EIA-914
Survey: The Energy Information
Administration (EIA) is asking for public comments on the proposed addition of
7 reporting States or regions while extending the Form EIA-914 for 3 years.
EIA, through a Federal
Register notice, seeks comments so
that the agency can maximize the utility of the information collected and
assess the impact of collection requirements on the public. The target
respondents of Form EIA-914 are operators of natural gas wells. Currently there are 227 respondents, a sample
drawn from a universe of about 8,300 known operators. Using information
collected on Form EIA–914, EIA estimates and disseminates timely and reliable
monthly natural gas production data at the national level, and for Texas and
Louisiana (both including State offshore natural gas production), New Mexico,
Oklahoma, Wyoming, and the Federal Gulf of Mexico. The proposed revisions would
add Alaska, California, Colorado, Kansas, Montana, North Dakota, and the
Federal Offshore Pacific. By adding these additional areas, the geographic
coverage and accuracy of the gas production estimates will be improved. The sampling
methodology will be the same as for current States. The EIA-914 data collection
is considered essential to the mission of the U.S. Department of Energy (DOE)
for the development, implementation, and evaluation of energy policy and
legislation. It is important to the EIA
because of the increasing demand for natural gas in the United States and the
requirement for accurate and timely natural gas production information
necessary to monitor the U.S. natural gas supply and demand balance. DOE Microhole
Initiative: The U.S. Department of
Energy’s (DOE) Microhole Initiative, a 2-year-old program launched to reduce
costs and environmental impacts of oil and gas well drilling, is yielding new
tools that are expected to be commercially available soon. The program’s aim is
to develop technologies to further the application of coiled-tube drilling in
the United States, in turn improving the economics of recovering previously
unattainable oil and natural gas resources in marginal or declining fields
throughout the Nation. Some of these tools, designed to drill
ultrasmall-diameter natural gas and oil wells, have been successfully
field-tested and await full-scale commercialization. Several other microhole
projects are being completed and will soon move into the field-test
stage. Microhole drilling entails using coiled-tube drilling rigs, which
are small, easily transportable rigs that unspool coils of thin tubing to
drill wells with diameters of less than 4.5 inches or equally small-diameter
"sidetrack" boreholes from existing wells. This approach leaves a
much smaller footprint in environmentally-sensitive areas and produces much
less drilling waste compared with conventional rigs that deploy standard-size
drill pipe to drill larger-diameter holes. The main purpose behind the program
was to find a way to economically develop the vast untapped oil and natural gas
resource lying at shallow depths in tens of thousands of declining or depleted
reservoirs. The United States has trillions of cubic feet of bypassed natural
gas. Similarly, there are more than 218 billion barrels of bypassed
conventional oil at less than 5,000 feet subsurface that is not recoverable
with current technology. Recovering one-tenth of that oil would equal roughly
10 years of OPEC imports at current levels. Natural Gas
Transportation Update: ·
Iroquois Pipeline
Operating Company declared an Operational Flow Order (OFO) on Thursday, January
25, and Friday, January 26, because of forecasted colder weather. Unscheduled shipper gas was not available
during this time and operators were asked to adhere to daily nominated volumes
in order to maintain system integrity. ·
Gulf South
Pipeline Company announced that production may be shut in during a scheduled
pigging maintenance on a New Orleans area line segment from January 30 through
February 8. Depending on demand in the
New Orleans area, capacity may be affected that would require the shut-in. ·
Gulf South
Pipeline Company began unscheduled maintenance at the Koran Compressor Station
in Haughton, Louisiana, on Tuesday, January 30.
Capacity was expected to decrease by 20,000 decatherms per day for at
least 3 days. ·
Florida Gas
Transmission Company issued an Overage Alert Day for market-area customers
because of cold weather and low linepack on Friday, January 26. The Overage Alert day extended through
Monday, January 29, with a 15 percent tolerance for negative daily imbalance on
Friday, and a 25 percent tolerance Saturday through Monday. ·
Operational
developments caused Centerpoint Energy Gas Transmission Company to declare an
Operational Alert on Saturday, January 27, until further notice. The pipeline is not allowing short imbalance
and unauthorized overrun quantities in order to meet its firm obligations. | ||||||||||||||||||||||||||||||||||||||||||
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