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|Impact of Higher Natural Gas Prices on Local Distribution Companies and Residential Customers|
|Residential Natural Gas Prices: What Consumers Should Know|
|An Assessment of Prices of Natural Gas Futures Contracts As A Predictor of Realized Spot Prices at the Henry Hub|
|Overview of U.S. Legislation and Regulations Affecting Offshore Natural Gas and Oil Activity|
|Changes in U.S. Natural Gas Transportation Infrastructure in 2004|
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Overview (Wednesday, January 16, 2007 to Thursday, January 23, 2008)
Released: January 24, 2008
Next release: January 31, 2008
<![if !supportLists]>· <![endif]>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.
<![if !supportLists]>· <![endif]>Prices at the Henry Hub declined 39 cents per million Btu (MMBtu), or about 5 percent, to $7.84 per MMBtu.
<![if !supportLists]>· <![endif]>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.
<![if !supportLists]>· <![endif]>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).
<![if !supportLists]>· <![endif]>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:
<![if !supportLists]>· <![endif]>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.
<![if !supportLists]>· <![endif]>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.
<![if !supportLists]>· <![endif]>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.
<![if !supportLists]>· <![endif]>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.