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Overview: Thursday, October 25, 2007 (next release 2:00
p.m. on November 1, 2007) Natural gas spot and futures prices generally
decreased this report week (Wednesday to Wednesday, October 17-24), as moderate
weather prevailed across much of the Lower 48 States. Although tropical storms
entering the Gulf of Mexico production region—evidenced by a system currently
moving through the Caribbean—could still disrupt supplies, the passing of at
least the most active part of the hurricane season may help explain the price
declines. On the week the Henry Hub spot price decreased $1.01 per MMBtu to
$6.10. At the New York Mercantile Exchange (NYMEX), prices for futures
contracts also registered significant decreases. The futures contract for
November delivery declined about 49 cents per MMBtu on the week to $6.972.
Working gas in storage is well above the 5-year average for this time year,
indicating a healthy supply picture ahead of the winter heating season. As of
Friday, October 19, working gas in storage was 3,443 Bcf, which is 7.2 percent
above the 5-year (2002-2006) average. The spot price for West Texas
Intermediate (WTI) crude oil increased $1.11 per barrel, ending trading
yesterday at $88.30, or $15.22 per MMBtu. Spot natural gas prices generally dropped during the
past four trading sessions, resulting in significant net declines for this
report week. As of this writing, the National Hurricane Center is monitoring a
tropical system in the Atlantic (the official hurricane season continues until
the end of November). However, to date in this hurricane season, there has been
little disruption of supplies from tropical storm activity. Outside of
storm-related developments, moderate temperatures likely reduced
weather-sensitive demand, as often occurs during the fall “shoulder” season
(named for its position between the summer and winter peak demand seasons). On
the week, the spot price at the Henry Hub decreased $1.01 per MMBtu, or about
14 percent, to $6.10. Other spot prices along the Gulf Coast and in East and
South Texas registered similar decreases of between $0.81 and $1.14 per MMBtu.
In the Northeast, where it was warmer-than-normal for much of the week, the
average price yesterday (October 24) was $6.51 per MMBtu, which was 93 cents
lower than the previous Wednesday. The price of gas off Texas Eastern
Transmission in the Northeast decreased to $6.51 per MMBtu, representing the
largest decline in the region at $1.04. For the week, price declines in the
Rockies, at an average of 70 cents per MMBtu, were generally less than in other
regions. Heating demand may have limited the price declines as winter-like
weather moved into parts of the Rockies, where temperatures in places such as
Denver, Colorado, hit lows in the 30s. Nonetheless, the average price in the
Rockies region yesterday was $4.23 per MMBtu, which was $1.87 lower than the
Henry Hub price. The price for spot deliveries in Florida was $7.26 per MMBtu
yesterday, which was lower on the week by $1.00. However, the Florida price was
still the highest in the country as demand remained strong for natural gas as a
fuel for power generation to meet air-conditioning load in the State.
Futures prices declined at
the NYMEX, also likely owing to current moderate temperatures, the perception
of adequate storage supplies, and the declining potential for a massive supply
disruption from a tropical storm. The price of the near-month contract (for
November delivery) decreased 49 cents per MMBtu, or 7 percent, during the
report week, settling at $6.972 yesterday. The only daily gain during the week
came yesterday (October 24), with the near-term contract increasing 21 cents
per MMBtu in part because of forecasts for colder weather. The current November
contract price of $6.97 per MMBtu is slightly lower than the November 2006
expiration price of $7.15 and just about a nickel more than the expiration of
last month’s (October) contract. The 12-month strip, which is the average price for futures
contracts over the next 12 months, closed yesterday at $7.78 per MMBtu, a
decrease of about 30 cents since last Wednesday. Currently, the highest-priced contract in the 12-month strip is the
February 2008 contract, which closed yesterday at $8.074 per MMBtu, a premium
of $1.974 to yesterday’s Henry Hub price. This premium provides a significant
economic incentive to put natural gas into storage for delivery during the
higher-priced winter time period. Recent
Natural Gas Market Data
Working gas in underground storage as of October 19
was 3,443 Bcf, which is 7.2 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 68 Bcf, which was significantly higher than
both the 5-year average net injection of 49 Bcf and last year’s net injection
of 24 Bcf. As a result, current inventory levels grew to 232 Bcf above the
5-year average. Current inventories are still below last year’s unusually high
levels; however, the difference narrowed to just 15 Bcf. Heating and cooling
degree-day statistics published by the National Weather Service for the period
roughly coinciding with the storage week indicate that weather-related gas
demand was relatively limited in most regions. Heating degree-days for the
United States as a whole were 12 percent below normal. Furthermore,
temperatures were unusually moderate in regions with large population centers
(and associated energy demand) such as in the East North Central Census Division,
which includes Chicago. (see
Temperat ure Maps)
Other Market Trends: EIA Releases
Report on Updated Storage Capacity Estimates:
The
Energy Information Administration’s (EIA) newly-released report, the Estimates of Maximum Underground
Working Gas Storage Capacity: 2007 Update, provides an update to
an estimate for U.S. aggregate natural gas storage capacity that was released
in 2006. A conservative estimate of
maximum capacity is about 3,700 billion cubic feet. Although the concept of maximum working gas
storage capacity seems rather straightforward, certain aspects of capacity
measurement and industry operations preclude the determination of a single,
definitive estimate for maximum capacity.
The report also provides estimates from two alternative approaches to
estimate the volume of natural gas that can be stored in U.S. underground
storage facilities EIA Is
Soliciting Comments on Proposed Revisions to the EIA-914 Survey: The Energy Information Administration (EIA)
published a Federal
Register notice on Friday, October 19, soliciting comments from
interested parties by December 18, 2007, on proposed revisions to Form
EIA-914. Using information collected on Form EIA-914,
EIA estimates and disseminates timely and reliable monthly natural gas
production data at the national level and for certain States. According to the notice, EIA plans to rename
the EIA-914 as the Monthly Natural Gas
and Crude Oil Production Report. The
proposed revisions include increasing the data elements from two to four
by adding crude oil and lease condensate production data elements to the
existing data elements of gross natural gas and lease gas production. Additionally,
the number of areas reported would expand from 7 to 14. The survey currently collects
production data for the Federal Offshore Gulf of Mexico,
Louisiana (onshore and offshore), New Mexico, Oklahoma, Texas (onshore and
offshore), Wyoming, and other States (the remaining States, including their
State offshore areas). The States to be added are Alaska (onshore and offshore),
California (onshore and offshore), Federal Offshore Pacific, Colorado, Kansas,
Montana, and North Dakota. Currently there are 220
respondents, a sample drawn from a universe of about 8,400 known
operators. The proposed changes are
expected to increase the number of respondents by 130. Natural Gas Transportation Update:
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