for week ending July 18, 2007 | Release date: July 19, 2007 | Previous weeks
Overview: Thursday, July 19, 2007 (next release 2:00
p.m. on July 26, 2007)
Since
Wednesday, July 11, natural gas spot prices decreased at virtually all markets
in the Lower 48 States. Prices at the Henry
Hub declined 41 cents per MMBtu, or 6 percent, since Wednesday, July 11, to
$6.24 per MMBtu. At the NYMEX, the
futures contract for August delivery at the Henry Hub settled yesterday (July
18) at $6.528 per MMBtu, falling 7 cents per MMBtu, or 1 percent since last
Wednesday, July 11.Natural gas in
storage was 2,692 Bcf as of July 13, which is 15.7 percent above the 5-year
average (2002-2006). The spot price for
West Texas Intermediate (WTI) crude oil gained $2.45 per barrel on the week
(Wednesday-Wednesday) to $75.03 per barrel or $12.94 per MMBtu.
Natural
gas prices fell at virtually all market locations since last Wednesday, July
11, with declines of 25 to 50 cents per MMBtu or about 4 to 12 percent.Moderating temperatures in most areas of the
Lower 48 States likely accounted for the widespread declines, as cooler
temperatures mitigated cooling demand for natural gas.On a regional basis, price declines averaged
between 18 and 58 cents per MMBtu, or 3 and 13 percent, since last Wednesday,
July 11. The largest price decreases
since last Wednesday, July 11, occurred principally in the Rocky Mountain
region, where prices fell by more than 57 cents per MMBtu, or 13 percent on
average. By far, the smallest decreases
occurred in the Arizona/Nevada and Florida regions, where prices fell by 18 and
24 cents per MMBtu on average, respectively, with the Florida citygate posting
the highest price in the Lower 48 States at $8.00 per MMBtu. Elsewhere, average price decreases by region
ranged between 30 and 43 cents per MMBtu. Despite these declines and lower electric generation demand relative to
last year, prices generally exceeded levels reported last year at this time,
with prices at the Henry Hub $0.22 per MMBtu or 4 percent above last year's
level. The principal exception to the
year-over-year price increases occurred in the Rocky Mountain region, where
prices at selected markets were between $1.87 and $2.28 per MMBtu or about 35
and 43 percent below last year's level.
At the NYMEX, prices for the futures contracts for
delivery in the next 12 months were mixed, with the 12-month futures strip
(August 2007 through July 2008) climbing about 5 cents per MMBtu, or about less
than 1 percent, since last Wednesday, July 11. The prices of the NYMEX futures
contract for delivery at the Henry Hub during the remaining months in the 2007
refill season (August through October 2007) fell about 9 cents per MMBtu, or 1
percent, since last Wednesday, July 11, while the other months in the 12-month
futures strip generally increased between 7 and 15 cents per MMBtu, or about 1
to 2 percent.Overall, the 12-month
futures strip (August 2007 through July 2008) traded at a premium of about
$1.60 per MMBtu relative to the Henry Hub spot price, averaging $7.84 per MMBtu
as of Wednesday, July 18. These relative
pricing patterns reflected ample incentives for suppliers to inject natural gas
into storage.
Recent Natural Gas Market Data
Working
gas in storage totaled 2,692 Bcf as of Friday, July
13, which is 16 percent above the 5-year average inventory level for the report
week, according to EIA's Weekly Natural Gas Storage Report (see Storage Figure). As of July 13, stocks were
63 Bcf below the 2,755 Bcf in storage at this time last year, yet still
exceeded the 5-year average by 365 Bcf. This marks the 12th consecutive
week that storage levels increased relative to last year's level. On the week,
net injections into working gas storage totaled 65 Bcf compared with the 5-year
average injection of 74 Bcf and last year's net injection of 64 Bcf for the
same report week. Warmer-than-normal
temperatures throughout the Lower 48 States likely contributed to the
below-normal injections (see Temperature Maps).
Cooling degree-days were 14 percent above normal levels on average in the Lower
48 States, exceeding normal levels by more than 24 percent in the New England,
Middle Atlantic, East North Central, Mountain, and Pacific Census Divisions.
GAO Releases Report on Energy
Derivatives Trading and CFTC Oversight:
According to the July 12, 2007, Government Accountability Office (GAO) report, inflation-adjusted
energy prices in both futures and physical markets increased significantly for
crude oil, unleaded gasoline, heating oil, and natural gas between 2002 and
2006, with the crude oil, unleaded gasoline, and heating oil prices more than
tripling during this period. In its report, GAO analyzed trends and patterns in
the futures and physical energy markets and the effect of these trends on
energy prices. Rising energy prices have been attributed to a variety of
factors, and recent trends in the futures and physical markets highlight the
changes that have occurred in both markets between 2002 and 2006. Volatility in
energy futures prices generally remained above historic averages for most of
the period but declined during 2006 to levels near or at historical
averages. The number of non-commercial
traders, including hedge funds, in the futures markets has increased.
Consequently, the volume of energy futures contracts traded and the volume of
energy derivatives traded outside traditional futures exchanges has grown.
While the changes in the futures markets for energy commodities were occurring,
tight supply and rising demand in the physical markets placed upward pressure
on prices. The report also discusses the Commodity Futures Trading Commission's
(CFTC) regulatory and enforcement authority over derivatives markets. CFTC's
primary focus is on the operations of traditional futures exchanges. With the
rise of futures trading on non-traditional exchanges, which are exempt from
CFTC oversight, such as over-the-counter (OTC) markets, questions have been
raised as to the CFTC authority to protect investors from fraudulent,
manipulative, and abusive practices. According to the report, CFTC generally
believes that it has sufficient authority over OTC derivatives and exempt
energy markets.