Overview: Thursday, September 20, 2007 (next release
2:00 p.m. on September 27, 2007)
Natural
gas spot price movements were mixed this week (Wednesday to Wednesday,
September 12-19), as a variety of factors resulted in price increases at more
than half of the trading locations in the Lower 48 States. At the same time,
the presence of Tropical Storm Ingrid and the possibility of Tropical
Disturbance Number 50 turning into Tropical Storm Jerry did little to boost
natural gas futures prices this week. The price of the New York Mercantile
Exchange (NYMEX) futures contract for October delivery settled at $6.180 per
MMBtu yesterday (September 19), which is 26 cents, or about 4 percent, less
than last Wednesday’s price. As of Friday, September 14, 2007, natural
gas in storage was 3,132 Bcf or 8.2 percent above the 5-year average. The
spot price for West Texas Intermediate (WTI) crude oil continued climbing,
increasing $2.14 per barrel this week to $81.99 per barrel or $14.14 per MMBtu
yesterday. Crude oil prices marked a record price for the third
consecutive day, after the Energy Information Administration (EIA) reported
that the crude oil stockpiles had declined by 3.8 million barrels on the week
and the Federal Reserve reduced interest rates by half a percent.
Moderate
weather in parts of the country, increased cooling load in the West this week,
as well as a variety of market influences, including record-high crude oil
prices and abundant natural gas volume in storage, led to mixed spot price
movements in the Lower 48 States. Spot market activity since last Wednesday
included price decreases in the Midcontinent region, as well as in
Alabama/Mississippi, Florida, and California. The Henry Hub spot price,
however, increased on the week, averaging $6.24 per MMBtu yesterday, 11 cents
higher than last Wednesday. Prices at most of the other trading locations in
Louisiana also increased, recording a regional average of $6.12 per MMBtu, 5
cents higher than 1 week ago. Despite temperatures that would have limited the
cooling load for much of this week in the Northeast, average spot prices in
this region increased by 4 cents. While prices at three trading locations in
the Northeast decreased on the week, at the remaining points, including
Transcontinental Pipeline’s New York location, prices increased between 2 and
17 cents. In the Rockies, an outage resulting from an equipment fire in the
Cheyenne Plains compressor station located in Weld County, Colorado, completely
cut off deliveries to Cheyenne Plains Gas Pipeline from Wyoming Interstate
Company and Colorado Interstate Company. With already low prices in the
Rockies, the additional restriction led spot prices even lower, with the
Cheyenne Hub recording an average price of 3-cents per MMBtu price on Monday,
September 17. Flow of gas has resumed since then, and the price at the Hub was
$1.23 per MMBtu yesterday.
In
contrast to last week’s significant increases, the price of the futures
contract for October delivery at the Henry Hub decreased 25.8 cents, or about 4
percent, to $6.180 per MMBtu since last Wednesday, September
12. Similarly, all of the remaining contracts in the 12-month strip
decreased on the week, with decreases averaging 28 cents per MMBtu or 3.5
percent. The average settlement price for the 12-month strip was $7.483 per
MMBtu yesterday. The potential disruption from tropical storms in the Gulf of
Mexico, as well as evacuation of non-essential personnel from offshore
platforms by BP, Chevron, and Shell early this calendar week, proved to have
little impact on the futures contracts prices. The October and November futures
contracts recorded decreases in three trading sessions this week, which were
sufficient to offset sizeable increases in the other two trading sessions,
leading to net decreases on the week. The futures contracts strip for delivery
during the upcoming heating season traded yesterday at $7.655 per MMBtu, 21 cents
lower than the heating season strip at the same time last year. While natural
gas futures prices are below those of last year, the Henry Hub spot price as of
yesterday was 25 percent higher than the September 19, 2006, price of $4.98 per
MMBtu.
Recent
Natural Gas Market Data
Working
gas in storage increased to 3,132 Bcf as of Friday, September 14, according to
the EIA Weekly Natural Gas Storage Report (see Storage Figure). Storage inventories are currently 8.2 percent
above the 5-year average, and about 1 percent below last year’s storage level
at this time. Storage inventories slipped below last year’s level for the first
time since July 13, 2007. The implied
net injection of 63 Bcf is about 26 percent lower than the 5-year average
injection of 83 Bcf and about 34 percent below last year’s injection of 95
Bcf. The lower-than-average injection this week partly reflects increased
temperatures across the United States, which kept demand for space cooling
elevated. For the week ending September 13, 2007, cooling degree-days
(CDD) exceeded normal by about 33 percent. Temperatures in all Census Divisions
with the exception of West North Central exceeded normal levels, according to
degree-day data released by the National Weather Service. Four Census
Divisions, the New England, Middle Atlantic, East North Central, and East South
Central, recorded CDD levels at least 40 percent above normal (see
Temperature Maps). The higher temperatures contributed to increased
electricity demand in the Lower 48 States, which was 5.4 percent higher than
the same week last year according to the latest Edison Electric Institute
report. Incremental electricity demand is fed largely by natural gas, which
would have contributed to the below-average injection to storage. Electricity consumption for the week ended
September 15 was 81,556 gigawatt-hours.
Other Market
Trends:
Potential Gas
Committee (PGC) Releases New Natural Gas Resource Estimate: The new PGC estimate of the total U.S.
natural gas resource base as of year-end 2006 is 1,525 trillion cubic feet
(Tcf), which is more than 16 percent higher than in the 2004 estimate. This
total includes 204 Tcf of proved gas reserves at year-end 2005, the most recent
estimate independently made by the Energy Information Administration. The estimated resource that PSC believes
could be found and produced in future years is 1,320.9 Tcf. This is composed of
1,154.8 Tcf resident in oil or natural gas reservoirs and 166.1 Tcf resident in
coalbed reservoirs. The estimated natural gas resources excluding coalbed
methane are 21.6 percent higher than in the 2004 PGC estimate, and the
estimated coalbed methane resources are 1.9 percent lower. These changes arose
primarily from analysis of new data for the Gulf Coast, Mid-Continent, Rocky
Mountain, and Pacific areas. The greatest increase in gas resources resulted
from new assessments of shale-gas plays in the Arkoma, Anadarko, Fort Worth,
and Permian basins of the Mid-Continent Area.
Natural Gas Transportation Update:
·
Dominion Gas
Transmission Company announced that the Cornwell station’s engines #7, #8, and
#9 were taken out of service. Furthermore, everything on the wet system south
of Cornwell station in West Virginia was out of service as of Thursday,
September 13, for emergency pipeline repairs. As a result, productions in
bubbles 2206, 2207, 3226, and 3227 were shut in until late Friday. On
Wednesday, however, the pipeline reported that it took the entire Cornwell
station out of service to make line repairs that were necessitated by a mine
subsidence. The work is expected to be completed late Thursday.
·
On September 15,
2007, CenterPoint Energy Gas Transmission issued an operational alert as a
result of increasing levels of natural gas in its storage fields, which
decreases the pipeline’s ability to manage long imbalances. All shippers are
directed to avoid long balances on the system. Until further notice, excess
contract quantities (ECQ) penalties will be assessed against pool managers who
incur long imbalances.
·
CenterPoint
Energy issued another operational alert effective Wednesday, September 19,
informing shippers that the delivery capacity at Columbia Gulf/Perryville
stations is limited to 190,705 decatherms (Dth) per day. The capacity reduction
is the result of an unscheduled maintenance at the Delhi station in Richland
Parish, Louisiana. No capacity for interruptible transportation service is
expected to remain available while the repairs are ongoing. Firm delivery
nominations will be reduced. The pipeline expects that the repairs will be
completed within 1 week.
·
Northwest
Pipeline Corporation announced that it is performing a unit inspection at the
Kemmerer compressor station in Wyoming between September 18 and 23, 2007. Since
primary firm nomination requests through the station have exceeded the
available capacity of 619,000 Dth per day, the pipeline declared a deficiency
period for the duration of the unit inspection. Based on the design capacity of
655,000 Dth per day, the daily deficiency volume is 36,000 Dth.
