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:
<![if !supportLists]>· <![endif]>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.
<![if !supportLists]>· <![endif]>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.
<![if !supportLists]>· <![endif]>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.
<![if !supportLists]>· <![endif]>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.