for week ending August 15, 2007 | Release date: August 16, 2007 | Previous weeks
Overview: Thursday, August 16, 2007 (next release 2:00
p.m. on August 23, 2007)
Since Wednesday, August 8, natural gas spot prices
increased at virtually all markets in the Lower 48 States outside the Rocky
Mountain region. Prices at the Henry Hub
climbed $1.04 per MMBtu, or nearly 17 percent, since Wednesday, August 8, to
$7.30 per MMBtu. At the NYMEX, the
futures contract for September delivery at the Henry Hub settled yesterday
(August 15) at $6.864 per MMBtu, rising 64 cents per MMBtu or 10 percent since
last Wednesday, August 8. Natural gas in
storage was 2,903 Bcf as of August 10, which is 15 percent above the 5-year
average (2002-2006). The spot price for
West Texas Intermediate (WTI) crude oil gained $1.13 per barrel on the week
(Wednesday-Wednesday) to $73.36 per barrel or $12.65 per MMBtu.
Natural gas prices increased at virtually all market
locations outside the Rocky Mountain region since last Wednesday, August 8,
with some price spikes of $0.72 to $1.61 cents per MMBtu or about 10 to 21
percent. Scorching temperatures in large
areas of the Lower 48 States and tropical storm activity in the Caribbean
likely accounted for the widespread increases, as hot temperatures strengthened
cooling demand for natural gas, and storm activity threatened production in the
Gulf of Mexico. On a regional basis,
price hikes outside the Rocky Mountain region averaged between $0.82 and $1.03
per MMBtu, or 12 and 18 percent, since last Wednesday, August 8. The largest price increases since last
Wednesday occurred principally in the Texas and Louisiana regions, where prices
climbed by more than $1 per MMBtu, or more than 16 percent on average. By far, the smallest increases occurred in
the Rocky Mountain region, where prices increased 24 cents per MMBtu on average
with selected locations in the region posting declines of 42 to 63 cents per
MMBtu. Hot temperatures prevailed
throughout the South, Southwest, and parts of the Midcontinent regions since
Friday, August 10, and intensified cooling demand for natural gas. Tropical storm activity in the Atlantic
contributed to market uncertainty about natural gas production, further
exacerbating the price spikes. The
formation of tropical depression 5, which was upgraded to Tropical Storm Erin
on Wednesday, August 15, in relatively close proximity to the production areas
of the Gulf of Mexico led to evacuations of some personnel from selected
platforms, although no significant volumes of natural gas were shut in as of
Wednesday, August 15. As of Thursday,
August 16, Tropical Storm Erin was about 200 miles south of Galveston,
Texas. Concerns about Tropical Storm
Dean, which was about 900 miles east of the Lesser Antilles as of Thursday,
August 16, and poses a more remote, but potentially more severe threat to
production in the Gulf of Mexico, also contributed to the price increases since
last Wednesday, August 8.
At the NYMEX, prices for the futures contracts for
delivery in the next 12 months increased, with the 12-month futures strip
(September 2007 through August 2008) climbing about 30 cents per MMBtu, or
about 4 percent, since last Wednesday, August 8. The prices of the NYMEX
futures contract for delivery at the Henry Hub during the remaining months in
the 2007 refill season (September through October 2007) increased 62 cents per
MMBtu, or 10 percent on average, since last Wednesday, August 8; the other
months in the 12-month futures strip increased between 14 and 46 cents per
MMBtu, with each month's contract posting smaller increases in each successive
month. Overall, the 12-month futures
strip (August 2007 through July 2008) traded at a premium of about 80 cents per
MMBtu relative to the Henry Hub spot price, averaging $8.10 per MMBtu as of
Wednesday, August 15.
Recent Natural Gas Market Data
Working
gas in storage totaled 2,903 Bcf as of Friday, August
10, which is 15 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 August 10, stocks were
108 Bcf above the 2,795 Bcf in storage at this time last year, and
exceeded the 5-year average by 371 Bcf. On the week, net injections into working gas
storage totaled 21 Bcf compared with the 5-year average injection of 57 Bcf and
last year's net injection of 30 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 27 percent above
normal levels in the Lower 48 States, exceeding normal levels by more than 28
percent in the New England, Middle Atlantic, East North Central, West North
Central, South Atlantic, and East South Central Census Divisions.
EIA Releases New Report on
the Impact of Higher Natural Gas Prices: On August 15, the Energy Information Administration (EIA) released a
report entitled Impact of Higher Natural Gas Prices on
Local Distribution Companies and Residential Customers, which
examines some of the problems faced by local distribution companies (LDCs) and
natural gas consumers as a result of increasing heating bills in recent years.
According to the report, the number of LDC natural gas customers in arrears and
the dollar value of the overdue accounts have been rising since at least 2001.
The average percentage of past-due accounts for LDCs increased from 16.5
percent in 2001 to 21 percent in 2006. At the same time, the average amount of
past-due accounts rose 26.7 percent from $263 in 2001 to $334 in 2006. Related
to these problems, more households are seeking assistance in paying their
natural gas bills. The report examines various Federal, State, and utility
assistance programs, such as the Low Income Home Energy Assistance Program,
which experienced an increase in eligible households of 18 percent between 1999
and 2004, reaching a total of over 35 million households. The report also
examines innovative rate mechanisms used by LDCs to mitigate the impact of high
gas price-induced uncollectibles and lower throughput, and discusses the use of
physical and financial hedging by LDCs as a risk-mitigating strategy.