for week ending October 31, 2007 | Release date: November 1, 2007 | Previous weeks
Overview: Thursday, November 1,2007 (next release 2:00 p.m. on November
8,2007)
Since Wednesday, October 24, natural gas spot prices
increased at virtually all markets in the Lower 48 States. Prices at the Henry Hub rose $1.16 per MMBtu,
or 19 percent, since Wednesday to $7.26 per MMBtu. At the NYMEX, the futures contract for December
delivery at the Henry Hub settled yesterday (October 31) at $8.33 per MMBtu, rising
67 cents or 8 percent since Wednesday, October 24. Natural gas in storage was 3,509 Bcf as of October
26, which is 8.4 percent above the 5-year average (2002-2006), marking the
first time working gas stocks exceeded 3,500 Bcf, and breaking a 17-year-old
record. The spot price for West Texas
Intermediate (WTI) crude oil increased $5.86 per barrel on the week (Wednesday-Wednesday)
to $94.16 per barrel or $16.23 per MMBtu.
Natural gas spot prices increased on the week (Wednesday-Wednesday)
at virtually all market locations, with increases ranging from $0.44 to $1.66
per MMBtu. Colder temperatures across
large portions of the Lower 48 States and record-high crude oil prices likely
contributed to the price spikes. Continuing
tightness in the crude oil markets and increased geopolitical risks resulted in
new record-highs as WTI crude oil prices passed the $90 per barrel mark for the
first time on October 25 to $92.09 per barrel, and averaged $94.16 per barrel
yesterday (October 31). The largest
increases in natural gas prices since Wednesday, October 24, occurred
principally in the Rocky Mountains, Northeast, Midwest, and Louisiana regions,
where prices climbed by more than $1 per MMBtu on average. Although the Rocky Mountain region posted the
largest average regional increase since Wednesday, October 24, climbing by
$1.19 per MMBtu or 36 percent on average, average prices in the region remained
the lowest in the Lower 48 States at $5.42 per MMBtu, because of transportation
constraints. Meanwhile, prices in the
Northeast region were the highest in the Lower 48 States at $7.67 per MMBtu, after
increasing by $1.16 per MMBtu, or 18 percent, since Wednesday, October 24. The smallest price increases for the week
principally occurred in the Florida and Arizona/Nevada regions where prices
climbed 49 and 55 cents per MMBtu, respectively.
At the NYMEX, prices for the futures contracts for delivery
in each of the next 12 months increased, with the 12-month futures strip (December
2007 through November 2008) rising about 51 cents per MMBtu, or about 6 percent,
since last Wednesday, October 24. The futures contract for December delivery settled
yesterday (October 31) at $8.33 per MMBtu, climbing 67 cents per MMBtu, or 9 percent,
since Wednesday, October 24.The prices
of the NYMEX futures contract for delivery at the Henry Hub during the remaining
2007-2008 heating season months (December 2007 through March 2008) increased by
62 cents per MMBtu, or 8 percent, on average since last Wednesday. Overall, the 12-month futures strip (December
2007 through November 2008) traded at a premium of about $1.15 per MMBtu relative
to the Henry Hub spot price, averaging $8.405 per MMBtu as of Wednesday, October
31.The futures contract for November
delivery at the Henry Hub expired on Monday, October 29, at $7.269 per MMBtu,
increasing 35 cents per MMBtu, or 5 percent, since becoming the near-month
contract on September 27. Working gas in storage hit a record level of 3,509 Bcf as of Friday, October 26, which is 8.4 percent above
the 5-year average inventory level for the report week, according to EIA's Weekly Natural Gas Storage Report (see Storage Figure). At 3,509 Bcf, working gas stocks climbed past
the 3,500 Bcf mark for the first time, exceeding the previous all-time record
level of 3,472 Bcf reported for the end of November 1990.Stocks were 56 Bcf above the
3,453 Bcf in storage at this time last year and exceeded the
5-year average by 272 Bcf. The net
injection into working gas storage of 66 Bcf differs from the more typical
pattern of withdrawals for the week. The
66 Bcf addition compares with the 5-year average net withdrawal of 11 Bcf and last
year's net withdrawal of 5 Bcf for the same report week. Temperatures in the Lower 48 States were
moderate and roughly 5 degrees warmer than normal (see
Temperature Maps). These moderate temperatures limited
natural gas demand, thereby contributing to larger net injections of natural
gas into storage. Other Market Trends: EIA
Releases The Natural Gas Annual 2006: The Energy Information
Administration (EIA) released the Natural
Gas Annual 2006 (NGA2006) on October 31, which provides information on the
supply and disposition of natural gas in the United States. Production,
transmission, storage, deliveries, and price data are published by State for
2006. State summary data are also presented for 2002 to 2006. The NGA2006 includes a supplemental report,
which notes that warmer-than-average temperatures dominated the U.S. natural
gas market in 2006. Favorable weather during the heating season along with a
slight increase in U.S. marketed production of natural gas contributed to
higher-than-average inventories, resulting in a 13.6-percent decrease in the
average wellhead price in 2006. Despite minimal storm activity in the U.S. Gulf
of Mexico, production in this region was 7.9 percent lower than in 2005.
Marketed production in the United States increased by 2.4 percent in 2006,
however, largely because of the 4.9-percent increase in marketed production in
Texas. Lower heating demand contributed to a 1.6-percent decrease in total
consumption, although warmer-than-normal temperatures during the summer months
boosted natural gas demand by the electric power sector. GAO Releases
Report on CFTC Oversight of Energy Derivatives Markets: As part of the Commodity
Futures Trading Commission's (CFTC) reauthorization process, the U.S.
Government Accountability Office (GAO) in its October 24 report recommended
that Congress expand the scope of CFTC's authority over energy derivatives
trading, particularly in exempt commercial markets. The report was released in
light of substantial increases in energy prices for crude oil, heating oil,
gasoline, and natural gas since 2002, raising questions about the role of
derivative markets and the scope of CFTC's authority. During this period,
increasing numbers of noncommercial participants became active in the futures
markets (including hedge funds) and the volume of energy futures contracts
traded also increased. Simultaneously, the volume of energy derivatives traded
outside of traditional futures exchanges increased significantly. Because these
developments took place concurrently, the effect of any individual trend or
factor on energy prices is unclear. CFTC's oversight is focused on the
operations of traditional futures exchanges, such as the New York Mercantile
Exchange (NYMEX). However, an increasing amount of energy derivatives trading
also is taking place on markets that are exempt from CFTC's oversight, such as
the over-the-counter markets or various electronic platforms. Furthermore,
despite its oversight authority over futures exchanges, information collected
and reported on these exchanges has not kept pace with changing market
conditions. To improve the transparency of market activities and the
functioning of CFTC's oversight, the GAO recommends that CFTC improve the
usefulness of the information provided to the public, in addition to better
documenting its monitoring activities and developing more outcome-oriented
performance measures for its enforcement program.
NEB
Issues Winter Outlook for Energy Markets: In its recent
winter outlook, Canada's National Energy Board (NEB) estimates that North
American energy supply inventories are more than adequate for the upcoming
winter. According to the October 30 report, the NEB states that even if there
is a cold winter, high levels of natural gas in storage will be sufficient to
meet high heating demand, as both Canada and the United States are entering the
heating season with above average levels of natural gas in storage. Natural gas futures prices
are expected to remain between $6 and $8 per MMBtu this winter. If the
upcoming winter is exceptionally cold, however, the price of natural gas could
rise above $8 per MMBtu. Furthermore, the price of natural gas in North America
continues to differ significantly from its traditional pricing relationship
with crude oil, and thus high crude oil prices are not pushing the price of natural
gas upward significantly. Stronger U.S. domestic natural gas production and
higher liquefied natural gas (LNG) imports into the United States have offset
recent lower Canadian production. Overall, natural gas supply in North America
is projected to be fairly stable over the winter, and should begin increasing
again late in the season. The outlook further highlighted how storage supplies,
extreme weather conditions, and geopolitical events can impact energy prices
over the coming winter.
Natural
Gas Transportation Update: