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Overview:  Thursday, March 15, 2007 (next release 2:00 p.m. on March 22, 2007)

Spring-like temperatures in most regions of the country this week led to lower natural gas spot and futures prices in the Lower 48 States since Wednesday, March 7. On the week (Wednesday-Wednesday, March 7-14), the Henry Hub spot price decreased 66 cents per MMBtu, or about 9 percent, to $6.86. At the New York Mercantile Exchange (NYMEX), the futures contract for April delivery fell 28 cents per MMBtu on the week to a daily settlement of $7.083 yesterday (March 14). Working gas in underground storage was 1,516 Bcf as of Friday, March 9, which is 12 percent above the 5-year average inventory for the report week. The spot price for West Texas Intermediate (WTI) crude oil decreased $3.70 per barrel on the week to $58.15 per barrel, or $10.03 per MMBtu.




Mild temperatures early in the report week (March 7-14) led to widespread price decreases across the Lower 48 States. Virtually all market locations recorded decreases on the week, which ranged between 37 cents and $4.44 per MMBtu. Prices in the Northeast recorded the largest weekly decreases of any region in the Lower 48 States, decreasing by an average of $2.68 per MMBtu. Despite these decreases, spot prices in the Northeast remained the highest of any region as of yesterday at an average of $7.32 per MMBtu. The price in the New York City area off Transcontinental Gas Pipe Line (Transco) has dropped in five of the past six trading sessions, trading yesterday at $7.40 per MMBtu and reflecting a net decline for the week of $4.44 per MMBtu, or about 38 percent. For the week, prices along the Gulf Coast decreased between 52 and 78 cents per MMBtu. The Henry Hub spot price fell to $6.86 per MMBtu, which is 66 cents lower than last Wednesday’s price of $7.52 per MMBtu. Sizeable price decreases on the week were also recorded in key space-heating markets in the Midwest despite the return of near-freezing temperatures and moderate gains in yesterday’s trading. As of yesterday, prices in the Rockies were the lowest in the Nation at an average $5.64 per MMBtu, the only regional price average below the $6-mark.




NYMEX futures prices for months through the end of the next heating season (March 2008) also decreased this week, with prices falling by an average of 23 cents per MMBtu. The near-month contract (for April delivery) declined on the week by 28 cents per MMBtu, or 3.8 percent, as it settled yesterday at $7.083. On Tuesday, March 13, the near-month contract decreased to $6.892 per MMBtu, the lowest daily settlement price for the April 2007 contract since January 18. Yesterday, the April contract settled $0.464 per MMBtu lower than the March contract’s final settlement price of $7.547 and slightly lower ($0.15 per MMBtu) than the final settlement price of $7.233 for the April 2006 contract.  Similarly, the May 2007 contract decreased 30 cents per MMBtu on the week, or about 4 percent, to settle yesterday at $7.189 per MMBtu. The 12-month strip, which is the average price for futures contracts over the next 12 months, closed yesterday at $8.074 per MMBtu, 23 cents or about 3 percent lower than its March 7 price of $8.306 per MMBtu. Prices for contracts for the next winter heating season averaged yesterday $9.005 per MMBtu, considerably higher than the near-term contracts and $2.15 more than yesterday’s spot price at the Henry Hub.



Recent Natural Gas Market Data


Estimated Average Wellhead Prices








Price ($ per Mcf)







Price ($ per MMBtu)







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 was 1,516 Bcf, which is 158 Bcf or 11.6 percent, above the 5-year average, as of Friday, March 9, according to EIA’s Weekly Natural Gas Storage Report (See Storage Figure).  The implied net withdrawal was 115 Bcf for the week, which is significantly higher than both the 5-year average withdrawal of 79 Bcf and last year’s withdrawal of 59 Bcf. The East region recorded a net withdrawal of 92 Bcf, which is considerably above average for the report week of 57 Bcf. The larger-than-average withdrawal was consistent with the colder-than-normal temperatures that prevailed in the Northeast during the report week. In the West region, on the other hand, warmer-than-normal temperatures contributed to a net withdrawal of 1 Bcf, which is 88 percent lower than the 5-year average withdrawal of 8 Bcf for the week. For the week ended March 8, the coldest temperatures prevailed in the Northeast, where temperatures were 22 percent colder than normal as measured by the National Weather Service heating degree-days (HDDs) (See Temperature Maps).  The only region in the Lower 48 States to record warmer-than-normal temperatures for the report week was the Pacific Census Division, which recorded temperatures that were 26 percent above normal.



Other Market Trends:

Sound Waves Used To Turn Natural Gas Into Liquid:  On March 5, 2007, Los Alamos National Laboratory announced that the Swift LNG Company has a new technology that turns natural gas into a usable liquid fuel. The new process uses a thermoacoustic technology licensed by the Los Alamos National Laboratory.  This thermoacoustic liquefier cools the natural gas to minus 160 degrees Celsius, which is the temperature at which natural gas becomes liquefied.  This thermoacoustic liquefaction is expected to be more cost effective than current cryogenic technology and also would serve as an option to oil producers that flare their associated natural gas. The technology converts heat into sound waves and then converts the hot sound wave energy to cold refrigeration using highly-pressurized helium contained in a network of welded steel pipes. The system initially combusts a small fraction of the natural gas to heat one end of the steel pipe network. The resulting acoustic energy refrigerates the opposite end of the network, which cools the rest of the natural gas. This new technology requires no moving parts, making it potentially a more economical alternative to current liquefaction operations. Swift LNG expects to have the thermoacoustic liquefaction technology ready for commercial use by 2010.


EIA Reports Financial Results for Independent Energy Companies: On March 9, 2006, the Energy Information Administration (EIA) released the Financial News for Independent Energy Companies, Fourth Quarter 2006, which includes financial information for 35 independent energy companies.  These companies are typically smaller than the major companies and do not have integrated production and refining operations.  According to EIA, total income for the 35 companies grew by 29 percent in the fourth quarter of 2006 compared with earnings in the fourth quarter of 2005, mainly because of a 46-percent increase in the earnings of the 20 oil-field service companies covered by the report.  The higher income for oil field companies was driven by a higher worldwide rig count, which increased the demand for equipment and services that these companies provide.  In contrast, the net income of the 10 oil and natural gas producing companies included in the report declined by 62 percent from year-ago levels and earnings of the 5 marketer/refiner companies decreased by 29 percent. The drop in earnings of producer companies was caused by a 41-percent decrease in the price of natural gas compared with fourth-quarter 2005 prices, while the decrease in earnings for marketer/refiner companies was due to reduced refining margins.  Over the full year, all three groups of independent energy companies posted earnings increases in 2006 compared with 2005.


Natural Gas Transportation Update: 

·         Southern California Gas Company declared a high-linepack operational flow order (OFO) for Thursday and Friday, March 8 and 9.  The company also declared an OFO that held a 10 percent tolerance level for daily positive balances for Sunday’s gas day.

·         Pacific Gas and Electric Company (PG&E) issued a customer-specific Stage 2 high-inventory OFO for Sunday’s gas day.  PG&E allowed the OFO to lapse on Monday, but issued a systemwide Stage 2 high-inventory OFO for Tuesday with penalties of $1 per decatherm for exceeding an 11-percent tolerance for positive daily imbalances.

·         Repairs forced Transwestern Gas Company to reduce capacity from 550,000 MMBtu per day to 183,000 MMBtu per day at the WT-2 Station in west Texas on Friday, March 9.  The capacity cut affected 12 receipt points in the area.

·         Colorado Interstate Gas Company (CIG) performed maintenance on the Greasewood Compressor Station on Friday, March 9, which reduced station capacity from 195 MMcf per day to 130 MMcf per day.  CIG restored full capacity on Monday, March 12.



 Short-Term Energy Outlook