for week ending April 2, 2008 | Release date: April 3, 2008 | Previous weeks
Overview (Wednesday, March 26, to Wednesday, April 2)
Released: April 3, 2008
Next release: April 10, 2008
·
Natural
gas spot prices increased in all trading regions in the Lower 48 States this
report week (Wednesday–Wednesday, March 26–April 2). During the report week, the
Henry Hub spot price increased $0.34 per million Btu (MMBtu) to $9.59. Frigid
temperatures continued for a portion of the week in the Northeast and for most
of the week in the West, likely boosting space-heating demand.
·
At
the New York Mercantile Exchange (NYMEX), prices for futures contracts also
registered increases, albeit less than in spot markets. The futures contract
for May delivery rose about 15 cents per MMBtu on the week to $9.832.
·
With
the traditional heating season not quite over, natural gas withdrawals from underground
storage continued through last week. As of Friday, March 28, working gas in
storage was 1,248 billion cubic feet (Bcf), which is 0.5 percent above the
5-year (2003-2007) average.
·
West
Texas Intermediate (WTI) crude oil continued to trade at prices above $100 per
barrel during the report week. However, for this report week, the price decreased
$1.00 per barrel, trading yesterday at $104.83 per barrel or $18.07 per MMBtu.
Spot prices increased this week as
space-heating demand continued in key market areas and prices for major energy
commodities remained above historical values. Price increases generally were larger at trading
locations in the western half of the Lower 48 States. The average price at
Arizona/Nevada trading locations increased 76 cents per MMBtu for the week to
$9.37, while prices increased an average of 58 cents in California to $9.42. Cold temperatures affected consumption in the
eastern half of the United States through Monday and Tuesday, which drove
prices upward. However, the transition
to springtime appears to be underway with warmer temperatures now moving into
key consuming regions of the Northeast and the Midwest, resulting in a reversal
of price movements in yesterday’s (April 2) trading. With a major warming trend
over the next several days, the price at the Henry Hub in Louisiana dropped 33
cents per MMBtu yesterday to $9.59. Nonetheless, the net change for the report
week was an increase of 34 cents per MMBtu. Other spot markets along the Gulf
Coast in Louisiana and Texas also registered relatively large price increases
between $0.30 and $0.89 per MMBtu, resulting in an average regional price of
$9.61 in Louisiana and $9.49 in East Texas yesterday.
In the Northeast, the average price yesterday
was $10.47 per MMBtu, which was 53 cents higher than the previous Wednesday. Significant variability in pricing existed for much
of the report week, including increases exceeding $0.40 per MMBtu each day at
several market locations on Monday, March 31, and Tuesday, April 1, in response
to cold temperatures in the region. For the week, the average spot price for
delivery in New York off Transcontinental Gas Pipe Line (Transco Zone 6 Non-NY)
increased $0.75 per MMBtu, which was the highest net change of any trading
location in the region. As of April 2, the price for natural gas in New York
off Transco was $10.69, a premium of $1.10 per MMBtu more than the price
received at the Henry Hub. This premium over the price at the Henry Hub is
significantly lower than earlier this winter when prices at times exceeded $20
per MMBtu in the Northeast. The differential tends to lessen as seasonal heating
requirements in the Northeast wane.
As
measured by natural gas sendout at liquefied natural gas (LNG) import
terminals, LNG imports continued to average less than 1 Bcf per day during the
report week. Recent LNG imports are
substantially lower than the volumes that moved into the U.S. market this time
last year. LNG cargoes instead are
heading to Europe and Asia, where buyers continue to purchase LNG at
much higher prices than those that have prevailed in U.S. markets. LNG imports
averaged about 800 million cubic feet (MMcf) per day for the month of March
2008, while they averaged 2.6 Bcf per day in March 2007. For this report week, the
Trunkline LNG terminal in Lake Charles, Louisiana, reported low sendout volumes
of regasified LNG (an average of 15 MMcf per day). Additionally, activity was
limited at Dominion’s terminal in Cove Point, Maryland (with sendout averaging
just 130 MMcf per day). Meanwhile, activity has not been affected as
significantly at the Suez North America LNG terminal in Everett, Massachusetts,
where sendout activity of more than 470 MMcf per day was reported. At the El
Paso Corp.-owned Southern LNG terminal on Elba Island, Georgia, deliveries
averaged about 230 MMcf per day, while Excelerate Energy’s Gulf Gateway
facility located offshore Louisiana has not yet received any supplies in 2008.
Futures
prices increased at the NYMEX, likely because of wintry weather in the Northeast
and higher prices for competing products. The price of the near-month contract (for May delivery)
rose $0.147 per MMBtu this week to $9.832 at the close of trading on Wednesday,
April 2. The largest daily price movements this report week occurred Monday
(when the price increased $0.30 per MMBtu) and Tuesday (when the price declined
about $0.38). The current May contract price of $9.832 per MMBtu is $2.32
higher than the final May 2007 contract price of $7.508.
Recent
high prices extend throughout the forward curve, suggesting prices are expected
to remain elevated as industry begins rebuilding storage inventories for next
year’s heating season, which will compete with summertime natural gas demand to
fuel power generation for air-conditioning needs. Contracts for futures
prices beyond the near-month contract all generally increased during the week.
At the end of trading yesterday, the 12-month
strip, which is the average for futures contracts over the next 12 months, was
priced at $10.22 per MMBtu, an increase of about 9.8 cents since last Wednesday.
Beginning with the May 2008 contract,
forward prices increase steadily through the remaining months of 2008 and the
beginning of 2009. The highest-priced contract in the forward strip is the
January 2009 contract, which closed at $10.937 per MMBtu on April 2.
Recent Natural Gas Market Data
Working gas in storage decreased to
1,248 Bcf as of Friday, March 28, 2008, according to EIA’s Weekly Natural
Gas Storage Report (see Storage Figure).
This report week’s implied net withdrawal of 29 Bcf is significantly higher
than the 5-year average withdrawal of 2 Bcf for the week, reducing the
difference between current inventories and the 5-year average level to just 6
Bcf or 0.5 percent. During the comparable week last year, when spring-like temperatures
were more than 10 degrees warmer than this year, there was an injection of 35
Bcf. Nonetheless, this week’s report reflects changing storage activity with
the occurrence (for the second week in a row) of net storage injections in the
Producing Region (the only region so far this calendar year with net injections).
Storage levels as of March 28 reflect a total drawdown of 2,297 Bcf so far this
heating season from the high point of 3,545 Bcf as of November 2, 2007.
This week’s above-average withdrawal
came during a week when it was colder than normal for the country as a whole,
and significantly colder than normal in populous areas of the Midwest. Temperatures across the country were 6 percent lower than
normal, as measured by National Weather Service heating degree-days (HDDs) for
the week ended March 27. In the East North Central Census Division, which
includes Chicago, the weather was 15 percent colder than normal, in terms of
HDDs (see Temperature Maps and Data).
Other Market Trends:
EIA Releases a Report on Natural Gas
Storage Drawdown Requirements. The
Energy Information Administration (EIA) released a special report titled U.S. Storage Drawdown Analysis Report, which examines
contract terms that require owners of natural gas in storage to reduce their
inventories of working gas to specified levels by certain dates. According to
the report, estimated maximum allowable working gas in storage at the end of
the 2007-2008 heating season may be as low as 2,001 Bcf. Contractual agreements
for natural gas owners to reduce their end-of-season (March 31) storage levels
do not appear to be a major factor in aggregate end-of-season storage levels in
the United States, because historical end-of-season working gas volumes have
been lower than the volume allowed. The report also found that storage
operators that impose limits on working gas volume tended to have larger
facilities, with average capacity of 80 Bcf. Terms of service affecting
end-of-season gas holdings affect 2,162 Bcf of the U.S. working gas capacity,
where the allowable volume of natural gas in storage at the end of the season
is less than 20 percent of the total working capacity. Thirty-four companies,
accounting for 1,525 Bcf of working gas capacity, impose no restrictions to the
volume of natural gas allowed in storage facilities at the end of the season.
EIA Updates Status of Retail Choice
Programs. EIA has updated its
website on the status of retail gas competition in each State with information
through December 2007. Overall, 21 States and the District of Columbia have
legislation or programs in place that let residential consumers and other
small-volume gas users purchase natural gas from someone other than their traditional
utility company. However, the availability and characteristics of these
customer choice programs vary widely from State to State. According to the Web-based report, Natural Gas Residential Choice Programs, enrollment in
customer choice programs reached a new high in 2007, increasing nearly 11
percent over the level in 2006, although the number of States with choice
programs remained the same. Despite the overall increase, interest in
customer choice seems to have waned in several States with long-standing
programs. Overall, about 13 percent or about 4.6 million of the
approximately 35 million residential natural gas customers with access to
choice were buying natural gas from marketers as of December 2007, up from the
4.2 million participating in 2006. Most of the gains were in Georgia and the
large gas-consuming States of Michigan, New York, and Ohio, where consumers
have a choice of many marketers and numerous pricing options. The number of marketers providing services to
residential customers increased or remained the same in all States but two, and
the overall total was 11 percent more than in 2006 (91 vs. 82).
EIA Requests Comments on Proposed Data
Collection. In an April 2, 2008, Federal Register notice, EIA is soliciting comments on
proposed revisions and a 3-year extension of six surveys conducted by EIA’s
Office of Oil and Gas, Natural Gas Division. These surveys collect information
on natural gas production, underground storage, processing, transmission,
distribution, consumption by sector, and wellhead and consumer prices. The
information collected in the surveys is used to support public policy analyses
of the natural gas industry. Additionally, the statistics generated from the
surveys are posted to the EIA website in a number of EIA products, including
the Natural Gas Weekly Storage Report,
Natural Gas Monthly, Natural Gas Annual, Short-Term Energy Outlook, Annual
Energy Outlook, and Annual Energy
Review. Minor changes are proposed to each of the surveys in the package,
mostly to simplify and clarify the survey forms and instructions. Comments on
the proposed revisions and extension are requested by June 2, 2008.
Natural Gas Transportation Update:
·
Southern Natural
Gas Company reminded shippers that the Army Corps of Engineers began performing
necessary maintenance on April 1 on the Mississippi River levee, downstream of
the White Castle compressor station in southern Louisiana. The maintenance
requires depressurization of both the 24- and 30-inch White Castle Franklinton
Loop lines. During the outage, West Leg capacity will not be available through
the White Castle compressor station and receipts upstream of the compressor
station will not be scheduled unless shippers nominate a corresponding delivery
point that is also upstream of the station. The outage is expected to last
through April 6.
·
Enterprise
Product Partners LP reported on March 28 that operations at its Pioneer
cryogenic processing facility have been suspended following a release of
natural gas and the resulting fire, which was restricted to a small area within
the plant. The plant, which is located in Lincoln County, Wyoming, processes
550 million cubic feet per day of natural gas and extracts 26,000 barrels per
day of natural gas liquids under normal operating conditions. Based on the
information available at the time, Pioneer is expected to resume service in 2
to 3 weeks. Meanwhile, all gas volumes are being diverted to the company’s
adjacent silica gel gas-processing plant.
·
Mississippi
River Transmission Corporation issued a system protection warning (SPW)
effective April 2 as a result of cold weather conditions in its service
territory, which stretches from Louisiana through Arkansas, Missouri, and
Illinois. During the SPW, which will remain in effect until further notice, the
pipeline will not schedule volumes that result in daily short positions and it
will not schedule returns to shippers of previously parked natural gas under
the park and loan service.
·
Florida Gas
Transmission issued an overage alert day (OAD) resulting from high temperatures
and low linepack for gas days April 1 and 2. The pipeline set the tolerance level
for negative daily imbalances at 25 percent, indicating that there were no
interruptions to previously scheduled interruptible transportation during the
OAD.