Natural Gas

Overview (Wednesday, January 30, to Wednesday, February 6)

Released: February 7, 2008

Next release: February 14, 2008

 

• Since Wednesday, January 30, natural gas spot prices decreased at most markets in the Lower 48 States.  Prices at the Henry Hub fell 23 cents per million Btu (MMBtu), or about 3 percent, to $7.94 per MMBtu. 
• At the New York Mercantile Exchange (NYMEX), the futures contract for March delivery at the Henry Hub settled yesterday (February 6) at $7.994 per MMBtu, falling 5 cents or less than 1 percent since Wednesday, January 30. 
• Natural gas in storage was 2,062 billion cubic feet (Bcf) as of February 1, which is 3 percent above the 5-year average (2003-2007). The implied net withdrawal of 200 Bcf was the second largest this heating season. 
• The spot price for West Texas Intermediate (WTI) crude oil decreased $5.18 per barrel on the week to $87.16 per barrel or $15.03 per MMBtu.

 

 

 

Prices:

Natural gas spot prices decreased on the week (Wednesday-Wednesday) at most market locations, as moderating temperatures decreased heating demand for natural gas.  Coming off a period of extreme cold, moderating temperatures and easing pipeline constraints resulted in price declines.  Price decreases at most market locations ranged between $0.03 and $1.00 per MMBtu since Wednesday, January 30.  On a regional basis, prices decreased between 1 and 4 percent on average. Declining crude oil prices since last Wednesday, January 30, likely contributed to the price decreases at many market locations.

 

Prices declined in trading on each successive day from Wednesday, January 30, through Monday, February 4, but rebounded somewhat during the following 2 trading days.  Price declines through Monday, February 4, were partially offset in trading on Tuesday and Wednesday as a cold snap was expected to move into large portions of the Lower 48 States.  On a regional basis, declines through Monday, February 4, ranged between $0.48 and $1.06 per MMBtu, while increases since then were less pronounced, ranging between $0.37 and $0.63 per MMBtu.

 

The largest price decreases in the Lower 48 States occurred in the Northeast region where the average price declined 43 cents per MMBtu or about 4 percent since last Wednesday, January 30.  Nevertheless, prices in the region were the highest in the Nation, averaging $8.81 per MMBtu on Wednesday, February 6.  The price declines in the Northeast region were the largest in relative as well as absolute terms, falling 4 percent since last Wednesday, January 30.  Intraweek price movements in the region posted the largest declines in the Lower 48 States through Monday, February 4, and the largest increases since then.  Since last Wednesday, January 30, the only market locations in the Lower 48 States to post a net price increase were in the Northeast region. The Columbia Gas and Iroquois Waddington markets each posted a gain of about 1 percent as the midweek price rally more than offset the declines recorded through Monday, February 4. 

 

 

 

 

 

At the NYMEX, futures prices for natural gas delivery through February 2009 were mixed while the price of the contract for March 2008 delivery declined 5 cents per MMBtu since last Wednesday, January 30.  Prices for the 12-month futures strip (March 2008 through February 2009) averaged $8.468 per MMBtu as of Wednesday, February 6, rising about 1 cent per MMBtu, or less than 1 percent, since last Wednesday, January 30.  Prices of futures contracts for delivery from May 2008 through October 2008 were virtually unchanged, and contracts for delivery during November 2008 through February 2009 posted increases ranging between 2 and 7 cents per MMBtu. 

 

On Wednesday, February 6, the 12-month futures strip (March 2008 though February 2009) traded at a premium of 53 cents per MMBtu relative to the Henry Hub spot price. Settlement prices for delivery over the 12-month period (March 2008 though February 2009) ranged between $7.994 and 9.916 per MMBtu with the price for each successive contract month exceeding the preceding month.  Prices for delivery next winter (December 2008 through February 2009) traded at a premium of more than $1.03 per MMBtu relative to the spot price.

 

 

Recent Natural Gas Market Data

 

 

Storage:

Net withdrawals from working gas storage during the report week exceeded the 5-year average, but were less than last year for the same report week (see Storage Figure). The net withdrawal from working gas storage of 200 Bcf is 13 percent more than the 5-year average of 177 Bcf and 9 percent less than last year’s net withdrawal of 219 Bcf for the same report week.  These differences likely reflected the heating demand for natural gas as heating degree-days in the Lower 48 States roughly approximated normal levels during the report week, but were well below the level reported for the same week last year (see Temperature Maps and Data). Overall, gas-weighted heating degree-days were 3 percent above the normal level and 7 percent below last year’s level for the Lower 48 States.  All Census Divisions in the Lower 48 States posted heating degree-days well below last year’s level, except for the Pacific Census Division where heating degree-days were 25 percent colder than last year for the same report week. 

 

At 200 Bcf, the net withdrawal from storage was the second-largest withdrawal reported during the current heating season.  During the 4-week period since January 4, withdrawals from storage have averaged 172 Bcf per week, compared with the average of 131 Bcf for the same period.  If working gas stocks decline according to the 5-year average for the remainder of the heating season, working gas in storage on March 31, 2008, will total about 1,248 Bcf.

 

 

   

Other Market Trends:

DOE Announces Restructured Approach to FutureGen Project: U.S. Secretary of Energy Samuel W. Bodman announced a restructured approach to its FutureGen project that aims to demonstrate cutting-edge carbon capture and storage (CCS) technology at multiple commercial-scale Integrated Gasification Combined Cycle (IGCC) clean coal power plants. The FutureGen concept announced in 2003 planned the creation of a near-zero emission, 275 megawatt  power plant that would produce hydrogen and electricity from coal on a smaller-than-commercial scale, serving as a laboratory for technology development. Under the new strategy, the Department of Energy (DOE) will join industry in its efforts to build IGCC plants by providing funding for the addition of CCS technology to multiple plants that will be operational by 2015. The new approach builds on technological research and development advancements in IGCC and CCS technology achieved over the past 5 years and is expected at least to double the amount of carbon dioxide sequestered compared to the concept approach announced in 2003. The restructured approach allows DOE to maximize the role of private sector innovation, and provide a ceiling on Federal contributions. Under this plan, DOE's investment would provide funding for only the CCS component of the power plant–-not the entire plant construction as was planned under the FutureGen concept announced in 2003. DOE issued a Request for Information that seeks industry's input by March 3, 2008, on the costs and feasibility associated with building clean coal facilities that achieve the intended goals of FutureGen.

 

MMS Proposes Credits for Relinquishing Eligible Leases in the GOM: As mandated by the Energy Security Act of 2006, the Minerals Management Service (MMS) proposed an amendment to its regulations to provide credit to lessees who relinquish certain eligible leases in the Gulf of Mexico (GOM). The regulation also would define the eligible leases and establish how those credits may be used. The proposed rule would provide a credit equal to the bonus bid originally paid plus subsequent rental payments to lessees who relinquish leases within the specified areas. Lessees may use the credits in lieu of monetary payment for either a lease bonus bid or royalty due on oil and gas production from most other leases in the Gulf of Mexico or transfer the credits to other parties for use as bonus bid or royalty payments due on most Gulf of Mexico leases. The Energy Security Act of 2006 mandated a moratorium on oil and gas leasing and any related activity in any part of the Eastern Planning Area that is within 125 miles of the coastline of the State of Florida and a portion of the Central Planning Area that is within 100 miles of the coastline of Florida.

 

Natural Gas Transportation Update:

• As of Friday, February 1, Northwest Pipeline Company is limiting withdrawals from Questar Pipeline’s Clay Basin storage facility in Utah to 125,000 decatherms (Dth) per day until further notice. The reduction requirement is necessary in order to limit the liquids flowing from Clay Basin into the Northwest pipeline system.
• Columbia Gulf declared a force majeure on Wednesday, February 6, on its mainline at the Hartsville compressor station in Macon County, Tennessee, which was destroyed after a tornado touched down. The force majeure covers all three lines that pass through the station: lines 100, 200, and 300. The full extent of the damage was not immediately clear, and the pipeline did not indicate how long the three lines will be out of service.
• Texas Gas Transmission Company has begun unscheduled maintenance at the Sharon compressor station in Louisiana. As a result of the maintenance that began on Tuesday, capacity of the Sharon Carthage system and Texas Eastern Sharon location was reduced to 450,000 MMBtu per day.
• Extreme weather conditions are significantly affecting construction progress of the Rockies Express-West system in Wyoming.  As a result service from the Echo Springs plant is not in place yet. According to the company, the service is expected to be available on or about February 7.

 

 Short-Term Energy Outlook