Natural Gas

Overview: Thursday, November 29, 2007 (next release 2:00 p.m. on December 6, 2007)

Since Wednesday, November 21, natural gas spot prices increased at all markets in the Lower 48 States. Prices at the Henry Hub rose 83 cents per MMBtu, or 12 percent, since Wednesday to $7.51 per MMBtu. At the NYMEX, the futures contract for December delivery at the Henry Hub expired yesterday (November 28) at $7.203 per MMBtu, falling 35 cents or 5 percent since Wednesday, November 21. Natural gas in storage was 3,528 Bcf as of November 23, which is 9 percent above the 5-year average (2002-2006), marking the fifth consecutive week that working gas stocks have exceeded 3,500 Bcf. The spot price for West Texas Intermediate (WTI) crude oil decreased $7.86 per barrel on the week (Wednesday-Wednesday) to $90.71 per barrel or $15.64 per MMBtu.

Prices:

Natural gas spot prices increased on the week (Wednesday-Wednesday) at all market locations, with increases ranging from $0.52 to $2.56 per MMBtu. Colder temperatures across large portions of the Lower 48 States and the continuing high level of crude oil prices likely contributed to the price spikes. WTI crude oil prices remained above the $90 per barrel mark, despite falling from the record-high of $99.16 per barrel established on November 20. The largest increases in natural gas prices since Wednesday, November 21, occurred principally in the western regions of the Lower 48 States, including West Texas, the Rocky Mountain, Arizona/Nevada, and Southern California regions. Prices in these regions climbed by more than $2 per MMBtu at selected market locations, and by more than $1.54 on average. The transportation constraints that depressed prices in the Rocky Mountain region throughout most of the refill season no longer appear to be as important, as heating demand in the region is sufficient to support a higher price level, with prices averaging $6.79 per MMBtu as of Wednesday, November 28.Meanwhile, prices in the Northeast region continued to be the highest in the Lower 48 States at $8.15 per MMBtu, after increasing by 95 cents per MMBtu, or 13 percent, since last Wednesday. The smallest price increases for the week principally occurred in the Midwest region where prices climbed 92 cents per MMBtu, or nearly 14 percent, to $7.75 per MMBtu.Despite the price increases, natural gas markets appear to be well-supplied with record levels of natural gas in storage. These supplies of natural gas likely mitigated the price hikes, stalling the upward momentum of prices in trading on November 27 and 28, and contributing to softness in the natural gas futures market.

At the NYMEX, plentiful supplies of natural gas, expectations of a warmer-than-normal heating season, and easing crude oil prices likely contributed to falling futures prices. Prices for the futures contracts for delivery in each of the next 12 months decreased, with the 12-month futures strip (December 2007 through November 2008) declining about 26 cents per MMBtu, or about 3 percent, since last Wednesday, November 21. The futures contract for December delivery expired yesterday (November 28) at $7.203 per MMBtu, falling 35 cents per MMBtu, or 5 percent, for the week.During its tenure as the near-month contract since October 30, the December 2007 futures contract declined 82 cents per MMBtu or 11 percent. The prices of the NYMEX futures contracts for delivery at the Henry Hub during the remaining heating season months (December 2007 through March 2008) fell by 36 cents per MMBtu, or 5 percent, on average since last Wednesday. Overall, the 12-month futures strip traded at a premium of about 5 cents per MMBtu relative to the Henry Hub spot price, averaging $7.564 per MMBtu as of Wednesday, November 28.

Recent Natural Gas Market Data

Storage:

Working gas in storage was 3,528 Bcf as of Friday, November 23, which is 9 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 3,528 Bcf, working gas stocks exceeded the 3,500 Bcf mark for the fifth consecutive week, since climbing past the previous all-time record level of 3,472 Bcf reported for the end of November 1990.Stocks were 106 Bcf above the 3,422 Bcf in storage at this time last year and exceeded the 5-year average by 301 Bcf. The net withdrawal from working gas storage of 12 Bcf compares with the 5-year average net withdrawal of 29 Bcf and last year's net withdrawal of 27 Bcf for the same report week. Temperatures in the Lower 48 States were warmer than normal during the report week (see Temperature Maps). Overall, gas-weighted heating degree-days were 14 percent below normal in the Lower 48 States. Furthermore, each Census Division outside New England reported heating degree-days that fell between 2 and 26 percent below normal, while the New England Census Division reported heating degree days of 13 percent above normal. These relatively moderate temperatures limited natural gas demand, which in combination with the strong price contango during the report week, mitigated withdrawals of natural gas from storage.  

Other Market Trends:

EIA Releases New Report on U.S. Greenhouse Gas Emissions: Total U.S. greenhouse gas emissions were 7,076 million metric tons carbon dioxide equivalent (MMTCO2e) in 2006, decreasing 1.5 percent from the 2005 level, according to Emissions of Greenhouse Gases in the United States 2006, a report released on November 28 by the Energy Information Administration (EIA). Since 1990, U.S. greenhouse gas emissions have grown at an average annual rate of 0.9 percent. The 2006 emissions decrease is only the third decline in annual emissions since 1990. U.S. greenhouse gas emissions per unit of Gross Domestic Product (GDP), or "U.S. greenhouse-gas-intensity," fell from 653 metric tons per million 2000 constant dollars of GDP in 2005 to 625 metric tons in 2006, a decline of 4.2 percent. Since 1990, the annual average decline in greenhouse-gas-intensity has been 2.0 percent. Total estimated U.S. greenhouse gas emissions in 2006 consisted of 5,934 million metric tons of carbon dioxide (83.8 percent of total emissions), 605 MMTCO2e of methane (8.6 percent of total emissions), 379 MMTCO2e of nitrous oxide (5.4 percent of total emissions), and 158 MMTCO2e of hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulfur hexafluoride (SF6) (2.2 percent of total emissions). The decline in carbon dioxide emissions from 2005 to 2006 can be attributed to a one-half percent decline in overall energy demand and a decrease in the carbon intensity of electricity generation. Favorable weather patterns, where both heating and cooling degree-days were lower in 2006 than 2005, and higher energy prices, were the primary causes of lower total energy consumption. The decline in carbon intensity of electricity generation was driven by increased use of natural gas, the least carbon-intensive fossil fuel, and greater reliance on nonfossil fuel energy sources. Methane emissions, meanwhile, decreased by 0.4 percent, while nitrous oxide emissions rose by 2.9 percent.  

DOE Issues New Rule on Energy Efficiency Standard: The Department of Energy (DOE) issued a Final Rule for efficiency standards for residential furnaces and boilers that will become effective in 2015.These new standards reflect DOE's commitment to improving appliance standards and meeting its 5-year appliance standard rulemaking schedule.According to DOE, these standards will reduce greenhouse gasses and save consumers money.In its Final Rule, DOE found that energy efficiency standards for residential non-weatherized and weatherized gas furnaces, mobile home gas furnaces, oil-fired furnaces, as well as gas and oil-fired boilers are technologically feasible and economically justified.DOE estimates that the new efficiency standards will save about 0.25 quadrillion Btu of energy over 24 years, which is equivalent to the total energy consumed by 2.5 million households in the United States in 1 year.According to DOE, the total energy savings are estimated to result in cumulative greenhouse gas emission reductions of about 7.8 million tons of carbon dioxide. The complete Final Rule was published in the Federal Register.  

Natural Gas Transportation Update:

• Gulf South Pipeline Company announced that it will be performing scheduled maintenance at the Carthage number 2 compressor station in Texas between Tuesday, December 4, and Thursday, December 6. Capacity through the compressor station will be reduced by as much as 50,000 decatherms (Dth) as a result of this maintenance.
• Kern River Gas Transmission Company announced on November 27 that it had lost significant linepack on its system as a result of supply shortages from the Pioneer plant in Wyoming and drafting by delivery point operators. As a result of the low linepack, the pipeline requested that its customers not take more than their scheduled quantities. The company also added that the Pioneer plant will not operate as a result of scheduled maintenance between November 29 and 30.
• Northwest Pipeline General Partnership reported that the storage balance north of the Kemmerer compressor station in Wyoming has dropped below 1.2 Bcf, and urged customers to refrain from further depleting the company's north end balancing storage account. Balancing inventories are necessary to ensure that all receipt points south of the Kemmerer compressor station are on rate. If necessary, the pipeline will cut nominations in all cycles to match any underdeliveries by upstream interconnects.
• Transcontinental Gas Pipe Line Corporation (Transco) announced that it will be completing work related to the Leidy-to-Long Island expansion project, which is scheduled to be in service in December 2007. In the meantime, some of the company's interruptible service will be limited as a result of the work. Transco is taking a section of the Leidy Line out of service.

Short-Term Energy Outlook