for week ending February 27, 2008 | Release date: February 28, 2008 | Previous weeks
Overview
(Wednesday, February 20, to Wednesday, February 27)
Released: February 28, 2008
Next release: March 6, 2008
Natural gas spot prices generally increased on the week (Wednesday-Wednesday)
at most market locations, in a week of mixed trading. Coming off a period
of extreme cold, moderating temperatures and easing pipeline constraints
resulted in price declines heading into the weekend on Friday, February 22. A return of cold weather to most of the Lower
48 States contributed to rebounding prices with the resumption of trading on
Monday, February 25. This price rally
resulted in net gains on the week (Wednesday-Wednesday) posted at most market
locations outside of the Midcontinent and Rocky Mountains regions.
On a regional basis, prices at the end of the week traded
within about 10 cents per MMBtu, or about 1 percent, of the levels recorded
last Wednesday, February 20. The principal exceptions to this overall pattern occurred in
the Northeast, Florida, Louisiana, and Mississippi/Alabama regions. Price increases in the Florida region were
the second largest in the Lower 48 States, which is quite unusual for this time
of year in the Sunshine State. Prices in
Florida climbed $1.11 per MMBtu since last Wednesday, February 20, as cold temperatures
moved into the region. Meanwhile, prices
in the Louisiana and Mississippi/Alabama regions increased 22 and 26 cents per
MMBtu, respectively. The only regional declines since last Wednesday, February
20, occurred in the Rocky Mountain and Midcontinent regions, with price decreases
of about a nickel in each region. The
narrow price declines in these regions likely resulted from modest decreases in
heating demand for natural gas since last week.
The largest price increases in the Lower 48 States occurred
in the Northeast region where the average price increased $2.54 per MMBtu or
about 22 percent since last Wednesday, February 20. Prices
in the Northeast region were the highest in the Nation, averaging $13.16 per
MMBtu on Wednesday, February 27. The price increases in the Northeast
region were by far the largest in relative as well as absolute terms, as a
result of extreme cold in the region. Intraweek
price movements in the region were also the most variable in the Lower 48
States, with daily price swings of as much as $8.93 per MMBtu at the New York
citygate, which posted a week-low price of $9.51 per MMBtu on Friday, February
22, and a week-high price of $18.44 per MMBtu.
At the NYMEX, the price of the contract for March 2008
delivery declined 4 cents per MMBtu since last Wednesday, February 20, while futures
prices for natural gas delivery through February 2009 increased. Since becoming the
near-month contract on January 30, the March contract price increased about 89
cents per MMBtu, or 11 percent, to reach $8.930 at final settlement
yesterday. Prices for the 12-month
futures strip (March 2008 through February 2009) averaged $9.473 per MMBtu as
of Wednesday, February 27, rising about 16 cents per MMBtu, or less than 2 percent,
since last Wednesday, February 20. The
increase in the 12-month strip occurred despite the week-on-week decline in the
price of the futures contract for March 2008, which expired yesterday (February
27) at $8.930 per MMBtu, declining 28 cents per MMBtu in its final day of
trading.
On Wednesday, February 27, the 12-month futures strip (March
2008 though February 2009) traded at a premium of 26 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 $8.930
and 10.263 per MMBtu. Prices for
delivery next winter (December 2008 through February 2009) traded at a premium
of 97 cents per MMBtu relative to the spot price.
Recent Natural Gas Market Data
Working gas in storage decreased to 1,619
Bcf as of Friday, February 22, 2008, according to EIA’s Weekly Natural Gas Storage
Report (see Storage Figure). The net withdrawal from working
gas storage of 151 Bcf is 7 percent more than the 5-year average of 141 Bcf and
4 percent more than last year’s net withdrawal of 145 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 were about 8 percent above
normal levels during the report week, but were almost 7 percent below the level
reported for the same week last year, according to the National Weather
Service’s degree-day data (see Temperature Maps and Data). All Census Divisions in the Lower 48 States posted
heating degree-days well below last year’s level, except for the West North
Central, Pacific, and Mountain Census Divisions where heating degree-days were 19,
44, and 17 percent more than last year for the same report week.
At 151 Bcf, the net
withdrawal from storage marked the sixth consecutive week in which implied net
withdrawals exceeded 100 Bcf, with working gas stocks declining 1,072 Bcf
during the period. During the 6-week
period since January 4, withdrawals from storage have averaged 162 Bcf per
week, compared with the 5-year average of 157 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
1,335 Bcf.
Other Market Trends:
Natural Gas Rig Count: The number of natural gas rigs drilling
increased to 1,430 for the week ended February 22, 2008, up from 1,428 in the
previous report week, according to Baker-Hughes Incorporated. However, rigs
were about 3 percent lower than the 1,472 recorded for the same week last
year. The average number of natural gas
rigs drilling so far this year is about 2 percent less than during the same
period last year, but about 12 percent higher than in 2006. Drilling activity
for natural gas has leveled off since September 2007, as the gas rigs drilling
began declining from their all-time high of 1,523 recorded for the week ended
August 31, 2007. This turnaround ended
the upward trend that began in mid-2002. The share of natural gas rigs drilling
as a percentage of the total gas and oil rig count has also been decreasing,
reaching 80.7 percent for the latest report week. At its peak, the share of
natural gas rigs drilling was 89.3 percent of the total rig count in June 2005,
when the overall share of natural gas rigs began declining (see Natural Gas Rigs Graph).
Natural Gas Transportation Update:
·
Columbia Gulf
Transmission Company updated its February 6 force majeure notice concerning the
damage caused by the tornado that struck its Hartsville, Tennessee, compressor
station, indicating that the station has been declared a complete loss. The
pipeline has initiated efforts to provide both a temporary and a permanent
solution for the replacement of the compressor station. According to the
February 22 posting, about 50,000 horsepower of relocated and rented
compression capacity will be available at the facility between June 1 and July
1, 2008, which would allow the pipeline to be restored to its FERC-certified
capacity of 2,156 million decatherms (Dth) per day. A permanent replacement of
the original facility is expected to be operational by April 1, 2010.
·
Tennessee
Gas Pipeline Company issued a notice of an emergency repair at its Compressor
Station 827 near Alexandria, Louisiana. The pipeline reported that immediate
repairs were necessary as a result of a bearing issue on the compressor
station’s solar turbine unit, estimating that the unit will be back in service
by mid-March.
·
Northwest
Pipeline Company announced that as of March 1 and until further notice, Clay
Basin storage facility withdrawal volumes will be limited to 80,000 Dth per
day. The reduction requirement is necessary in order to limit the liquid flow
from Clay Basin into the pipeline system.
·
Transcontinental
Gas Pipeline Corporation announced shipper restrictions effective February 27,
as a result of below-normal temperatures for much of its market area. According
to the pipeline, in order to maintain operational flexibility, it will not
allow any delivery make-up imbalance nominations, regardless of shippers’
imbalance positions.