for week ending May 9, 2007 | Release date: May 10, 2007 | Previous weeks
Overview: Thursday, May 10, 2007 (next release 2:00
p.m. on May 17, 2007)
Springtime
temperatures in most regions of the country this week and lack of any
significant cooling or heating load through much of the Lower 48 States led to
an easing of natural gas spot prices since Wednesday, May 2. Furthermore, the formation
of the first tropical storm of the 2007 Atlantic Hurricane Season 3 weeks prior
to the beginning of the traditional hurricane season appeared to have no impact
on the spot markets in the Lower 48 States. On the week (Wednesday-Wednesday,
May 2-9), the Henry Hub spot price declined 18 cents per MMBtu,
or 2.4 percent, to $7.46. In contrast to spot market activity, trading of
futures contracts at the New York Mercantile Exchange (NYMEX) this week resulted
in gains for all contracts with the exception of the near-month contract,
possibly reflecting an expected tightness in supply over the summer months. While
the NYMEX contract for June delivery decreased 1 cent per MMBtu
on the week to a daily settlement of $7.720 yesterday (May 9), contracts
through the end of the injection season all increased, albeit only by an
average of 0.3 percent. Net injections reported in today's release of EIA's Weekly
Natural Gas Storage Report brought natural gas storage supplies to 1,747 Bcf as of Friday, May 4, which is 20.5 percent above the
5-year average inventory for the report week. The spot price for West Texas
Intermediate (WTI) crude oil decreased $2.24 per barrel on the week to $61.54
per barrel, or $10.61 per MMBtu.
Moderating
temperatures this week left prices lower than the previous week at nearly all
market locations across the Lower 48 States. For the week, prices at
production-area trading locations along the Gulf Coast generally decreased
between 8 and 39 cents per MMBtu. The Henry Hub spot
price fell to $7.46 per MMBtu, which is 18 cents
lower than last Wednesday's price. The largest price decreases on the week were
in the Rocky Mountain region, which recorded decreases between 11 cents and
$1.36 per MMBtu, trading yesterday at the regional average of $5.01 per MMBtu.
West of the Rockies, excess supply in some areas and an increase in cooling
load in others led to a mixed price movement on the week. Still, the weekly
increases in southern California trading locations and points in Arizona/Nevada
trading regions were only between 6 and 13 cents per MMBtu. After a dip in the
temperatures during the first half of the report week in the Northeast, the
return of spring-like temperatures led to an easing in the spot market prices
in this region, recording average decreases of 20.0 cents per MMBtu on the
week, to a regional average $7.97 per MMBtu yesterday. The formation of the
first tropical storm of the season had no effect on the natural gas prices other
than dampening the cooling load in the South Atlantic States of Georgia and
Florida. According to the latest National Weather Service report, Subtropical
Storm Andrea is gradually weakening as it drifts southward offshore the
northeastern Florida coast.
NYMEX
futures prices increased this week with the exception of the June 2007 futures
contract, recording net weekly increases for contracts through the end of the
next heating season. The price movement reflected an uncertainty in the market,
as the possibility of an active hurricane season and a tight supply/demand
balance may have a significant impact on the futures prices during the coming
summer months and beyond. Nevertheless, as these increases were only between
2.5 and 3.7 cents, futures contracts on the week remained fairly flat. The
near-month contract (for June delivery) decreased only 1 cent on the week,
settling yesterday at $7.720 per MMBtu. Similarly, the July 2007 contract also
recorded a small net change (in this case a net weekly increase) of 1 cent,
settling yesterday at $7.881 per MMBtu. The rest of the contracts through the
end of the 2007 injection heating season traded yesterday above $8 per MMBtu,
while futures contracts for delivery between December 2007 and March 2008
averaged $9.718 per MMBtu in yesterday's trading. As a result, the 12-month
strip, which is the average price for futures contracts over the next 12
months, closed yesterday at $8.683 per MMBtu, an increase of 3.4 cents since
last Wednesday.
Estimated Average Wellhead Prices |
||||||
|
Nov-06 |
Dec-06 |
Jan-07 |
Feb-07 |
Mar-07 |
Apr-07 |
6.43 |
6.65 |
5.92 |
6.66 |
6.56 |
6.84 |
|
Price ($ per MMBtu) |
6.26 |
6.48 |
5.76 |
6.48 |
6.39 |
6.66 |
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 1,747 Bcf as of May 4, which is 20.5 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 implied net injection for the week was 96
Bcf, which was 48 percent higher than the 5-year average net injection of 65
Bcf and 19 percent higher than last year's net injection of 81 Bcf. As a
result, the difference between current inventory levels and the 5-year average
increased to 297 Bcf. While the difference between current inventories and last
year's level decreased with this week's report, the volume of gas in storage
remains 230 Bcf below the level at this time last year. The latest heating- and
cooling-degree day statistics published by the National Weather Service for the
period roughly coinciding with the week covered by this storage report show
that weather-related gas demand was minimal relative to the peak periods in the
summer and winter, limiting any heating- or cooling-load demand (see
Temperature Maps). All Census Divisions had heating
degree-days (HDD) that were lower than normal and below last year's; HDDs
numbered 41 percent lower than normal for the entire Lower 48 States. As for
cooling degree days (CDD), some Census Divisions showed large percentage
differences from normal, but the actual CDD levels were relatively low compared
with summer levels and therefore do not represent significant cooling demand.
Other Market
Trends:
EIA Releases
Its Latest Short-Term
Energy Outlook (STEO): The Energy Information Administration (EIA) on May 8, 2007, released its latest Short
Term Energy Outlook (STEO), which includes forecasts through December
2008. The May STEO highlights the
continuing problems for refineries, the West Texas Intermediate (WTI) crude oil
price, the Henry Hub natural gas spot price, as well as residential electricity
prices. Because of the
colder-than-normal weather in April, prices at the Henry Hub increased from an
average of $7.32 per thousand cubic feet (Mcf) in March to an average of $7.83
per Mcf in April. Despite the recent increase, prices are expected to decrease
in May to $7.51 per Mcf before rising over the next several months. The Henry
Hub natural gas spot price is expected to average $7.84 per Mcf in 2007 and $8.16
per Mcf in 2008. The projected West
Texas Intermediate crude oil price is expected to average $66 per barrel this
summer, compared with more than $70 per barrel last summer. Natural gas
consumption is expected to rise because of colder weather during the first 4
months of 2007. Total consumption was
more than 10 percent higher (7,140 Bcf) during the first quarter of 2007
compared with the first quarter in 2006. As of April 27, 2007, working natural gas in storage was 1,651 Bcf,
which was 266 Bcf more than the 5-year average (2002-2006).
Natural Gas
Transportation Update: