for week ending January 23, 2008 | Release date: January 24, 2008 | Previous weeks
Overview (Wednesday,
January 16, 2007 to Thursday, January 23, 2008)
Released: January 24, 2008
Next release: January 31, 2008
·
Since Wednesday,
January 16, natural gas spot prices decreased at most markets in the Lower 48
States, with the exception of the Northeast and Florida, and a few scattered
points in Louisiana, Alabama/Mississippi, and the Rocky Mountains.
·
Prices at the
Henry Hub declined 39 cents per million Btu (MMBtu), or about 5 percent, to $7.84
per MMBtu.
·
The New York
Mercantile Exchange (NYMEX) futures contract for February delivery at the Henry
Hub settled yesterday (January 23) at $7.621 per MMBtu, falling 51 cents or 6.3
percent since Wednesday, January 16.
·
Natural gas in
storage was 2,536 billion cubic feet (Bcf) as of January 18, which is 7.4 percent
above the 5-year average (2003-2007).
·
The spot price
for West Texas Intermediate (WTI) crude oil decreased $3.15, or 3.4 percent, per
barrel on the week to $87.65 per barrel or $15.11 per MMBtu.
Despite the seasonably cold weather
across much of the Lower 48 States, natural gas spot prices decreased at most
markets on the week. Price decreases
ranged between 1 and 48 cents since last Wednesday. The holiday-shortened week and the
above-average supplies of natural gas in storage undoubtedly contributed to the
spot price declines this week. The largest regional price decrease occurred in
the Arizona/Nevada locations, where prices decreased 43 cents per MMBtu to $7.84. Prices in both Texas and the Midwest declined
by an average of 33 cents to $7.73 and $7.99 per MMBtu, respectively.
Prices in the Northeast and Florida
continued to climb this week, as weather-related demand in these two markets
continued to exert significant upward pressure on prices. In the Northeast, prices increased on average by
$2.19 per MMBtu or about 22 percent, reaching a regional average price of
$11.58 per MMBtu. As of yesterday, the Algonquin citygate once again led the
region with the highest price in the Nation at $14.21 per MMBtu, after
recording a net increase of more than $4 since last Wednesday. Trading in the
Northeast during the week was very volatile, as the majority of locations
traded in ranges that exceeded $6 from lowest to highest prices. For example,
prices at Transco Zone 6, which serves New York City, ended the week yesterday
at $13.52 per MMBtu. However, prices
fluctuated by $10.93--hitting a peak price of $20.15 on Friday, January 18, a
day after hitting a weekly low of $9.22 per MMBtu. In Florida, with high
temperatures throughout the report week, prices also increased, albeit by only
68 cents per MMBtu, ending the report week at $9.29 per MMBtu.
At the NYMEX, the price of the February
2008 futures contract declined 51 cents per MMBtu since last Wednesday, ending
the report week at $7.621 per MMBtu. After
declining in each of the week’s trading sessions, the February 2008 contract
yesterday reached its lowest settlement price since its debut as the near-month
contract on December 28, 2007.
The price of the contract for March
2008 delivery also decreased on the week by about 48 cents or 6 percent to
$7.581 per MMBtu. Currently, the
March 2008 contract is the lowest- priced contract in the 12-month futures
strip (February 2008-January 2009), with both the February and March 2008
contracts trading below the average of the injection months’ contracts (April
2008-October 2008), reflecting the ample volume of natural gas in storage
available for consumption as the 2007-2008 heating season enters its second
half.
Recent
Natural Gas Market Data
Working gas in storage decreased to
2,536 Bcf as of Friday, January 18, 2008, according to EIA’s Weekly Natural
Gas Storage Report (see Storage Figure). The implied net withdrawal was 155 Bcf, which leaves
storage levels at 7.4 percent above the 5-year average. This report week’s
implied net withdrawal is about 4 percent below the 5-year average withdrawal
of 161 Bcf and is also about 7 percent lower than last year’s net withdrawal of
166 Bcf.
This week’s below-average withdrawal
was consistent with temperatures that were above normal for the Lower 48
States. Temperatures across the
country were about 12 percent warmer than normal and about 5 percent warmer
than last year, as measured by National Weather Service heating degree-days
(HDDs) for the week ended January 17. HDDs in eight Census Divisions were
warmer than normal, with the highest deviations recorded in the Middle Atlantic
and East North Central, both of which are very high gas-consuming areas of the
country (see Temperature Maps and Data). Only the Mountain Census Division recorded
temperatures that were colder than normal, with HDDs that numbered 6 percent
higher than the 234 that are normal for the week.
Operators entered the second half of the
heating season with roughly 2,600 Bcf of natural gas remaining in storage. During the first 76 days of the heating season, a net
volume of 964 Bcf of natural gas was withdrawn from underground storage. The
total net drawdown was significantly higher than for the same period last year,
when a total of 772 Bcf was withdrawn from storage. Should the net withdrawals
during the remainder of the heating season equal the drawdown for the
comparable period of last winter, about 1,350 Bcf would remain in storage on
March 31, 2008, or about 16 percent below the previous end-of-March stocks of
1,603 Bcf.
Other Market Trends:
NOAA Reports Warmer Ocean Could Mean
Fewer Hurricane Landfalls: On January 22, 2008, the National Oceanic and
Atmospheric Administration (NOAA) released a report on new findings by NOAA
climate scientists. According to the
report, observed warmer ocean waters could mean fewer Atlantic hurricanes
striking the United States, as ocean temperatures heavily influence the
development of tropical storms.
Observations indicated that warming of global sea surface temperatures
is associated with a sustained long-term, increase of vertical wind shear in
the main development region for Atlantic hurricanes. The increased vertical wind shear coincides
with a downward trend in the U.S hurricanes reaching landfall. NOAA used U.S. hurricanes making landfall
because it is the most reliable Atlantic hurricane measurement over the long
term. Using observed data since the mid
19th century, scientists have found a decrease in the trend of U.S.
hurricanes reaching landfall, concurrent with the increase in global ocean
temperatures. This trend coincides with
an increase in vertical wind shear over the tropical North Atlantic and the
Gulf of Mexico. According to NOAA,
observations from 1854 to 2006 show a warming of sea surface temperatures
almost everywhere over the global ocean, with significant warming in tropical
regions in the Pacific, Atlantic, and Indian Oceans. Warmer waters in the tropical Pacific,
Indian, and North Atlantic Oceans produce opposite effects upon vertical wind
shear. Warming in the tropical Pacific
and Indian oceans increases vertical wind shear in the Atlantic hurricane main
development region, while warming in the tropical North Atlantic decreases
vertical wind shear. Overall, warming in
the Pacific and Indian oceans is of greater impact and produces increased
levels of vertical wind shear that suppress Atlantic hurricane activity.
Natural Gas Transportation Update:
·
El Paso Natural
Gas Company (EPNG) declared a strained operating condition (SOC) because of a
draft condition on its entire system effective January 18. According to the company, a combination of
relatively low receipts and draws in excess of scheduled quantities resulted in
a substantial loss of linepack on EPNG's system. The imbalance tolerance was set initially at
10 percent, but the company indicated it would reduce the tolerance level if
conditions did not improve sufficiently.
The SOC lasted until January 20.
·
Columbia Gulf
Transmission Company announced an update on January 15 to the force majeure
that was declared on December 14, 2007, as a result of a pipeline rupture on Line 100 in Delhi, Louisiana. Effective gas day
Thursday, January 17, the capacity through the Delhi internal constraint will be reduced to 1,600,000 decatherms (Dth) while repairs to Line 100 are being performed.
·
Southern Natural
Gas Company (SNG) announced a Type 3 Level 2 operational flow order (OFO) to
all shippers, effective January 24. As a
result of current weather forecasts as well as projected demand, SNG announced
that several groups will be subjected to the OFO, including the 10 Savannah Line and the 170 Cypress Line
Delivery Group. The OFO carries a $15
per Dth penalty for deliveries exceeding 102 percent of daily entitlement. Both the Savannah Line and the Cypress
Delivery Group deliver natural gas from the Elba Island LNG terminal in Georgia
to the SNG system.
·
Sea Robin
Pipeline Company announced a shut-in of its processing plant as of January 20,
which was in effect until January 23. During the shut-in the plant continued to
dehydrate, but plant thermal reduction (PRT) nominations were reduced to zero,
according to the company. In conjunction
with the Sea Robin Gas Processing Plant outage, Columbia Gulf Transmission
Company limited capacity at its Sea Robin interconnect to 100,000 Dth.