Overview:  Thursday, April 26, 2007 (next release 2:00 p.m. on May 3, 2007)

Natural gas spot prices increased slightly at most market locations outside the Northeast and the Rockies since Wednesday, April 18, 2007.  For the week (Wednesday, April 18, to Wednesday, April 25), the spot price at the Henry Hub increased 5 cents, or less than 1 percent, to $7.59 per MMBtu.  The price of the NYMEX futures contract for May delivery settled at $7.689 per MMBtu yesterday (April 25), which is 19 cents or about 3 percent more than last Wednesday’s level.  As of Friday, April 20, 2007, natural gas in storage was 1,564 Bcf, which is 17.5 percent above the 5-year average.  The spot price for West Texas Intermediate (WTI) crude oil was $65.33 per barrel or $11.26 per MMBtu as of yesterday.  This is $2.19 per barrel more than the price last week, an increase of about 3 percent.

 

 

Prices:

Springlike temperatures finally arrived across most of the Lower 48 States this week after an unusually cool first few weeks of April.  As weather-induced heating load eased, natural gas spot prices softened during the beginning of the report week (Wednesday, April 18 to Wednesday, April 25).  As of Monday, prices at almost every trading location had declined by as much as 89 cents per MMBtu.  However, a return of colder weather increased prices in the last 2 days of trading, offsetting most of the declines at locations outside the Northeast and the Rockies.  The Henry Hub spot price increased 5 cents on the week, or less than 1 percent, to settle at $7.59 per MMBtu yesterday.  After significant declines through Monday’s trading day, spot prices in Louisiana gained an average of 37 cents per MMBtu during Tuesday and Wednesday’s trading.  The average regional spot price in Louisiana was $7.57 per MMBtu yesterday, which is about 8 cents, or 1 percent, more than the previous Wednesday’s price.  In the Northeast, prices had declined between 27 and 78 cents per MMBtu as of Monday.  Late-week gains, however, were not enough to offset the declines.  The average regional price in the Northeast was $8.16 per MMBtu yesterday, which is 22 cents, or about 3 percent, less than the price last Wednesday.  The pattern was similar in the Rockies where increases brought on by a late-season snow storm were not enough to offset the early week decreases at many locations.  Prices declined by an average of 12 cents per MMBtu in this region to settle at an average regional price of $5.93 per MMBtu yesterday.  Several locations in the Rockies are currently trading at prices up to 89 cents per MMBtu less than the price last year, whereas prices at almost every other trading location in the Lower 48 States are higher than last year by as much as $1.12.         

 

 

 

At the NYMEX, the price of the futures contract for May delivery at the Henry Hub increased to $7.689 per MMBtu yesterday, which is 19 cents, or about 3 percent, more than the price last Wednesday.  The contract prices exhibited a trend similar to that of prices at most spot markets, dropping about 11 cents in the first 3 days of trading before gaining 30 cents during Tuesday and Wednesday’s trading.  All natural gas futures contract prices listed on the NYMEX also increased between 2 and 3 percent this week, with contracts for next winter increasing slightly more (between 18 and 22 cents) than the June through October 2007 contracts (between 14 and 15 cents).  The large differential between the Henry Hub spot price and the futures contract prices for next winter reflects uncertainty concerning potential demand and supply fluctuations during the refill season.  Heat-induced cooling demand or supply disruptions related to hurricanes could create significant upward price pressure.  The current large price premium provides economic incentives to inject natural gas into storage.  At $9.921 per MMBtu, the January 2008 contract held a $2.33 premium to the Henry Hub spot price yesterday.  The 12-month strip, or the average price for contracts over the next year (May 2007 – April 2008), closed yesterday at $8.68 per MMBtu, which is 19 cents more than the price last Wednesday, and $1.08 more than the Henry Hub spot price.

 

 

Recent Natural Gas Market Data

 

Estimated Average Wellhead Prices
	Oct-06	Nov-06	Dec-06	Jan-07	Feb-07	Mar-07
Price ($ per Mcf)	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.

 

Storage:

Working gas inventories increased to 1,564 Bcf as of Friday, April 20, according to EIA’s Weekly Natural Gas Storage Report (see Storage Figure).  Stocks are currently 233 Bcf, or 17.5 percent, above the 5-year average of 1,331 Bcf for the report week, but 15 percent below last year’s level of 1,840 Bcf.  The implied net injection of 18 Bcf is relatively small compared with both the 5-year average net injection of 65 Bcf and last year’s net injection of 77 Bcf.  Unseasonably cool temperatures during the report week likely contributed to the lower-than-average net injection as natural gas demand for heating needs remained strong.  As measured by National Weather Service’s heating degree days, temperatures were coldest in New England, Middle Atlantic, and East North Central Census Divisions, where key demand markets are located (see Temperature Maps).  Temperatures were 15 to 32 percent colder than normal in these areas.  The East Storage Region, which contains these Census Divisions, had the smallest net injection this week at 1 Bcf compared with 6 Bcf in the West Region and 11 Bcf in the Producing Region.  Temperatures for the United States as a whole were 27 percent colder than normal.

 

 

 

Other Market Trends:

FERC Proposes New Rules on Price Transparency in Natural Gas Markets: On April 19, the Federal Energy Regulatory Commission (FERC) announced a Notice of Proposed Rulemaking (NOPR) intended to facilitate price transparency in markets for the sale and transportation of physical natural gas in interstate commerce. In order to implement its authority under Section 23 of the Natural Gas Act, which was added by Section 316 of the Energy Policy Act of 2005, FERC proposes to revise its regulations and to require that intrastate pipelines post daily capacities of, and volumes flowing through, their major receipt and delivery points and mainline segments in order to track daily flows of natural gas throughout the United States. Furthermore, FERC would require that buyers and sellers of more than a de minimis volume of natural gas report annual numbers and volumes of relevant transactions to the FERC to allow an estimate of the size of the physical U.S. natural gas market, assess the importance of the use of index pricing in that market, and determine the size of the fixed-price trading market that produces the information. Additionally, each holder of blanket marketing certificate authority or blanket unbundled sales services certificate authority would be required to notify the FERC as to whether it reports its transactions to publishers of electricity or natural gas price indices and whether such reporting conforms to certain standards. Currently, the FERC requires notification only if blanket certificate holders change their reporting practices; the new notification requirement would make notifications of reporting status more reliable. The proposed revisions would facilitate price transparency in physical markets for the sale or transportation of natural gas in interstate commerce, as well as protect the integrity of wholesale gas markets, and improve FERC’s ability to assess market forces and detect market manipulation. Comments on the NOPR are due 45 days after its publication in the Federal Register on April 26.

 

FERC Approves Pipeline Projects in the Rockies:  On April 19, the Federal Energy Regulatory Commission (FERC) approved construction of the new Rockies Express-West interstate pipeline project, as well as two related projects proposed by TransColorado Gas Transmission Company and Questar Overthrust Pipeline Company. The combined capacity of these pipelines constitutes a sizeable increment to interregional capacity, which is expected to have a significant impact on conditions in both up- and downstream markets.  Together, the three projects consist of nearly 800 miles of new pipeline across portions of Colorado, Wyoming, Nebraska, Kansas, Missouri, and New Mexico, and would transport more than 1.5 million decatherms (Dth) per day of natural gas from the Rocky Mountains to markets east of the Rockies.  The Rockies Express-West project would consist of 713 miles of 42-inch diameter pipeline beginning at the Cheyenne Hub in Weld County, Colorado, and extending eastward to an interconnection with the Panhandle Eastern Pipeline Company in Audrain County, Missouri.  The pipeline is the second part of a larger project, called the Rockies Express Project, which proposes the construction of 1,678 miles of pipeline with a capacity of 1.8 billion cubic feet per day.  The first 328-mile segment of the Rockies Express project, which connects the Meeker Hub in Rio Blanco County, Colorado, to the Cheyenne Hub, is currently in service, while the final segment of the project is still seeking regulatory approvals.  Construction on Rockies Express-West is expected to start in May, and service is planned to start by January 1, 2008.  In addition to the Rockies Express-West pipeline, TransColorado Gas Transmission Company received FERC approval to construct facilities that would allow an additional 250,000 Dth per day to be transported through the TransColorado system to the Rockies Express pipeline.  Also, Questar Overthrust received FERC approval to construct a 77-mile pipeline to connect its existing system with the Rockies Express Pipeline via an interconnection at Wamsutter in Sweetwater County, Wyoming.  The new pipeline would add 625,000 Dth per day of capacity to a proposed delivery point at Wamsutter. 

 

Natural Gas Transportation Update:

·                    Southern Natural Gas Company declared force majeure at its Muldon storage facility between April 24 and April 30, 2007.  The company reduced each contract storage service (CSS) customer’s daily injection quantity (DIQ) and daily withdrawal quantity (DWQ) on a pro rated basis during the time of the shut-in.  Each CSS customer will be allowed 36 percent of its currently effective DIQ and DWQ during the shut-in.  The reduction level may change during the force majeure.  During the shut-in, nominations will be monitored closely to determine if there is an imbalance between supply and demand that might disrupt the system. 

·                    Nova Gas Transmission Ltd. (NGTL) declared force majeure on Monday, April 23, for Haddock, Haddock North, and Haddock South receipt points as a result of a line leak on its 20-inch Marten Hills pipeline.  The lines have been isolated, and repairs are expected to be completed by April 28.  Typically flows at these stations are about 33.7 million cubic feet (MMcf) per day. NGTL also reported that planned maintenance on the 30-inch Foothills mainline is moving slower than expected, but with the temperatures improving, progress is expected to accelerate.  Maintenance should be completed sometime during fall 2007.  During the maintenance, receipt capability at the Alberta border will remain about 2,259 MMcf per day (temperatures permitting).  Firm service levels at the Alberta border are 2,168 MMcf per day for the remainder of the summer and there may be restrictions to interruptible or firm service at the Alberta border.

·                    Gulf South Pipeline Company, LP revised its maintenance scheduled on its Index 300-11 segment located in Jackson County, Mississippi.  Starting May 1 and continuing for about 5 days, service will not be available from Pascagoula (Chandeleur) to Pascagoula (Chevron).  To the extent primary firm service is interrupted at the affected locations, Gulf South will be claiming force majeure for as long as service cannot be performed because of the maintenance activity. 

·                    Colorado Interstate Gas Company is conducting maintenance on each of its storage fields in April and through the first part of May.  Injections may be limited to firm shippers during that time.  Affected fields are Ft. Morgan, scheduled for April 16-22 with capacity of 125,000 MMcf per day and making up 38 percent of total injection capacity; Flank field for April 23-29 with capacity of 55,000 MMcf per day making up 17 percent of the injection capacity; and Latigo for April 30-May 6 with capacity of 80,000 MMcf per day, making up 25 percent of the total injection capacity.  During these times normal injections for firm transportation shippers will be reduced by the percentages listed above. 

 

 Short-Term Energy Outlook