for week ending April 18, 2007 | Release date: April 19, 2007 | Previous weeks
Overview: Thursday, April 19, 2007 (next release 2:00
p.m. on April 26, 2007)
With winter-like conditions finally moving toward the
moderate temperatures (and less heating demand) of spring, natural gas spot
prices have eased across most of the country. During the report week (Wednesday–Wednesday,
April 11-18), the Henry Hub spot price declined 42 cents per MMBtu to $7.54. At
the New York Mercantile Exchange (NYMEX), prices for futures contracts also were
lower. The futures contract for May delivery decreased 35.8 cents per MMBtu on
the week to $7.497. Working gas in storage as of Friday, April 13, was 1,546
Bcf, which is 22.1 percent above the 5-year (2002-2006) average. The spot price
for West Texas Intermediate (WTI) crude oil increased $1.16 per barrel on the
week to $63.14, or $10.89 per MMBtu.
The
natural gas market may have finally settled into a shoulder season trading
pattern characterized by soft demand from the lack of weather extremes. A cold weather
front in the Northeast sustained winter-like conditions for several days further
into the spring, but this Nor'easter storm only temporarily boosted
space-heating demand. In any event, the storm's temporary effects did not lend
enough support to offset generally declining prices. With nothing but
springtime weather once again dominating weather forecasts for much of the
country, the average price at the Henry Hub was level or falling in four of the
past five trading sessions. For the report week, the Henry Hub price posted a
decline of more than 5 percent, falling to an average of $7.54 per MMBtu. Price
changes were largest in the West, where changes in the weather likely have
resulted in less space-heating demand. In the Rockies, the average price at the
end of the report week was $6.00 per MMBtu. Except for one market where prices increased, the average price decrease
in the Rockies was 76 cents per MMBtu. Although not necessarily reflected in
western prices, transportation and storage constraints have lessened in the
region, allowing suppliers access and more flexibility to reach destination
markets. For example, both Kern River Gas Transmission and Southern California
Gas in recent days ended high line-pack Operational Flow Orders (notices to
shippers of anticipated reduced flexibility in operations). Operations at Questar's
Clay Basin storage field have returned to normal after a temporary outage for
part of the week. After a cold weekend, more moderate weather has moved into
the Northeast, and prices for deliveries into New York City (Transcontinental
Gas Pipe Line Zone 6) yesterday averaged $8.71 per MMBtu, a decline of 28 cents
for the week. For the Northeast region as a whole, the average price decline
was 41 cents per MMBtu. The Northeast region this week continued to have the
highest prices in the country, averaging $8.38 per MMBtu as of Wednesday, April
18.
With forecasts of moderating temperatures for the
remainder of April, futures prices eased this week at the NYMEX. The NYMEX
contract for May delivery declined in three of the five trading sessions,
resulting in a net decrease of 35.8 cents to $7.497 per MMBtu. All futures
contracts through the end of the next heating season also declined on the week.
As a result, the price of the 12-month strip, or the average price for contracts
over the next year, decreased by 31.0 cents per MMBtu, or 3.5 percent, to
$8.490. The price of the near-month contract is more than 50 cents per MMBtu
lower than last year's price at this time (on April 18, 2006, the May contract settled
at $8.008 per MMBtu). However, the price of the May 2006 contract experienced a
steep decline in its final days of trading. The May 2006 contract ended up
expiring at $7.198, which is 29.9 cents lower than yesterday's closing price
for the May 2007 contract. Not unlike last year (and notwithstanding storage
activity in the past week), storage supplies are generally viewed as ample at this
time. At this time last year, the difference between the Henry Hub price and
the price for the NYMEX contract for delivery the following January (the month
that is normally the highest price in the 12-month strip) had widened to $4.25
per MMBtu, a spread that was highly unusual. The corresponding spread this year
is still atypically high, but is more narrow at $2.162 per MMBtu. Currently,
the January 2008 contract is priced at $9.702 per MMBtu.
Recent Natural Gas Market Data
Estimated Average Wellhead Prices |
||||||
|
Oct-06 |
Nov-06 |
Dec-06 |
Jan-07 |
Feb-07 |
Mar-07 |
5.03 |
6.43 |
6.65 |
5.92 |
6.66 |
6.59 |
|
Price ($ per MMBtu) |
4.90 |
6.26 |
6.48 |
5.76 |
6.48 |
6.42 |
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 was 1,546 Bcf as of April 13, which is 22.1 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 net change for the report week was
a withdrawal of 46 Bcf, which reduced the difference between current storage
inventories and the 5-year average (2002-2006) level for this time of year.
Although injections into underground storage are the norm for April (the first
month following the traditional heating season of November through March), net
withdrawals have occurred occasionally in the past as late season cold fronts
move through market areas. For example, in 2003, storage activity for the week
ending April 11 resulted in a net withdrawal of 46 Bcf as well. This report
week's withdrawal along with the 46-Bcf decline in 2003 is the largest
withdrawal recorded in April in EIA's 13-year database of weekly storage
activity reports. This report week's implied net withdrawal came during a week
in which the weather for the country as a whole was the coldest since the first
week of March and about 57 percent colder than normal, as measured by heating
degree-days (HDDs) published by the National Weather Service (see
Temperature Maps). Key
markets for space heating demand were considerably cooler than normal. In the Census
Divisions of the Northeast and Midwest regions, HDDs were at least 40 percent
more than normal.
Other Market
Trends:
EIA Releases Report on Foreign Ownership of Energy Enterprises
in 2004: The Energy Information
Administration (EIA) released a report on April 18, titled Foreign Direct Investment 2004,
describing the role of direct foreign ownership of U.S. energy enterprises with
respect to their energy operations, capital investments, and net foreign
investment flows (including net loans). Foreign direct investment (FDI) in the
United States is defined as the ownership or control, directly or indirectly,
by one foreign investor of 10 percent or more of the voting securities of an
incorporated U.S. business enterprise or the equivalent interest in an
unincorporated U.S. business enterprise (or asset). The report also examined
the patterns of direct investment in foreign energy enterprises by U.S.-based
companies. According to the report, the share of crude oil and natural gas
production by FDI affiliate companies declined slightly in 2004 to15 percent of
U.S. crude oil and 12 percent of U.S. natural gas. Additionally, the share of
U.S crude oil distillation capacity owned by FDI affiliates declined slightly
to 27 percent in 2004, primarily as a result of the divestiture of one
refinery. The report also stated that
net capital flows into the U.S. petroleum and natural gas industry by foreign
direct investors averaged $14 billion per year from 1999 to 2004. Direct
investment in petroleum and natural gas production abroad by U.S. direct
investors averaged $9 billion per year over the same period. The combined
production of crude oil and natural gas liquids and of natural gas in the
United States by FDI affiliates of foreign direct investors declined faster
than the total U.S. production of oil and natural gas in 2004, leading to
declining production shares for FDI affiliates. These declines were in part the
effect of Hurricane Ivan and other hurricane activity in the Gulf of Mexico.
The largest contributors to the decline, subsidiaries of BP (United Kingdom)
and Royal Dutch/Shell (at that time, Netherlands and United Kingdom), both have
substantial operations in the Gulf.
New Tunnel Planned Under Bering Strait: Viktor Razbegin, the deputy head of industrial
research at the Russian Economy Ministry, announced at a briefing on April 18
that Russia plans to build a tunnel under the Bering Strait to Alaska as part
of a $65 billion project to supply the United States with oil, natural gas, and
electricity from Siberia. The tunnel, which would be the world's longest, would
take 10 to 15 years to complete and would be a coordinated effort between
Russia, the United States, and Canada. Furthermore, a partnership of state
organizations and private companies would build and control the route, known as
the TKM-World Link. A planned 3,700-mile transportation corridor from Siberia into
the United States would feed into the tunnel, which at 64 miles would be more
than twice as long as the underwater section of the Channel Tunnel between
Britain and France, according to the plan. The tunnel would run in three
sections to link the two islands in the Bering Strait between Russia and the
United States. The planned undersea tunnel would contain a high-speed railway,
highway, and pipelines, as well as power lines and fiber-optic cables.
Natural Gas Transportation Update: