Overview
(Wednesday, January 30, to Wednesday, February 6)
Released: February 7, 2008
Next release: February 14, 2008
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
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:
