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Natural Gas Weekly Update Archive

for week ending August 1, 2008  |  Release date:  July 31, 2008   |  Previous weeks

Released: July 31, 2008
Next Release: August 7, 2008

Overview (Wednesday, July 23, to Wednesday, July 30)

  • During the report week (Wednesday-Wednesday, July 23-30), natural gas prices declined substantially at virtually all market locations in the Lower 48 States, with most decreases ranging between 40 and 99 cents per million Btu (MMBtu). Prices in some areas in the Lower 48 States declined by well more than $1 per MMBtu. The Henry Hub spot price ended the report week at $9.01 per MMBtu, which was 88 cents or 8.9 percent lower than last Wednesday’s (July 23) price.

  • At the New York Mercantile Exchange (NYMEX), prices for the September delivery contract declined 60 cents per MMBtu to $9.248. The August futures contract closed on Tuesday, July 29, at $9.217 per MMBtu, which reflects a net decrease of nearly $4 per MMBtu during its tenure as the near-month contract.

  • Natural gas in underground storage increased to 2,461 Bcf, registering a net injection of 65 Bcf. As of Friday, July 25, volumes of natural gas in storage remain 0.5 percent below the 5-year average.

  • The West Texas Intermediate (WTI) crude oil price rose $3.01 per barrel on the week. However, the price of crude oil fell to $122.21 per barrel on Tuesday, July 29, which was the lowest price since May 6. As of yesterday, crude oil was priced at $126.74 per barrel or $21.85 per MMBtu.

NYMEX Natural Gas Futures Near-Month Contract Settlement Price, West Texas Intermediate Crude Oil Spot Price, and Henry Hub Natural Gas Spot Price Graph

More Summary Data

The summer heat across much of the country and lower production in the Gulf of Mexico had very little effect on price movements this week. Overall, prices in the Lower 48 States declined, with decreases ranging between $0.40 and $1.98 per MMBtu. The price decreases came amid an increase in space-cooling demand across most of the country and the temporary shutdown of the Independence Hub in the Gulf, which began late Tuesday and took about 900 million cubic feet (MMcf) per day of production off the market. Spot prices at the Henry Hub decreased to $9.01 per MMBtu, dropping 88 cents or 8.9 percent per MMBtu on the week. As of yesterday, spot gas at the Henry Hub was trading at the lowest price since March 24, when it traded at $8.99 per MMBtu. Prices at other locations in Louisiana decreased by between 69 cents and $1 per MMBtu, to a regional average of $9.03 per MMBtu.

A temporary reprieve from the heat in the middle of the country led to some significant price decreases in the Midcontinent and Midwest trading locations. On the week, the average price in the Midcontinent decreased $1.35 per MMBtu, reaching a regional average yesterday of $7.59. Similarly, the average price in the Midwest was $9.05 or $1 less than recorded the previous Wednesday. In the Rockies region, which continues to record the lowest regional prices in the Lower 48 States, prices fell $1.60 on average. As of yesterday, the average regional price in the Rockies was $6.98 per MMBtu, the first time a regional average recorded a price below $7 since early January.

Spot Prices

At the NYMEX, the August contract expired at $9.217 per MMBtu on Tuesday, July 30, reaching the lowest closing price for a near-month contract since the closing of the March contract at $8.930 per MMBtu on February 27. On the week, the August contract decreased 57.1 cents from last Wednesday’s price of $9.788 per MMBtu. During its tenure as the near-month contract, however, the August contract recorded a net decrease of $3.981 per MMBtu or 30 percent. Prices for the August contract fluctuated widely, with price movements between days ranging from 3 to 86 cents per MMBtu.

Contracts for the new near-month contract decreased significantly on the week. At the end of trading yesterday, the contract for September delivery was 60.3 cents per MMBtu lower than last Wednesday’s price, settling at $9.248. Other futures contracts in the 12-month strip decreased between 19.5 and 61.3 cents per MMBtu, with the largest decrease recorded for the October 2008 delivery month. Overall, the 12-month strip as of yesterday was $9.666 per MMBtu, which was 42 cents or 4 percent lower than last Wednesday. The contracts for delivery between December 2008 and March 2009 remained above $10 per MMBtu, reflecting expectations of some tightness in supply during the winter months. This could be the result of the lower-than-average inventories of natural gas in storage and the uncertainty regarding future market conditions, including the potential of supply disruptions during the remainder of the hurricane season.

Wellhead Prices Annual Energy Review
More Price Data

Working gas in storage was 2,461 Bcf as of Friday, July 25, which is 0.5 percent below the 5-year average inventory level for the report week, according to EIA’s Weekly Natural Gas Storage Report (see Storage Figure). Current stocks are 357 Bcf below last year’s stocks of 2,818 Bcf for the same week and 12 Bcf lower than the 5-year average of 2,473 Bcf. The net injection into storage of 65 Bcf is 18 percent higher than the 5-year average net injection of 55 Bcf, but about 15 percent lower than last year’s net injection of 75 Bcf for the same report week.

Temperatures in the Lower 48 States were warmer than normal during the report week (see Temperature Maps and Data). Overall, cooling degree-days were 9 percent above normal in the Lower 48 States, and about 26 percent above last year for the same week. Each Census Division with the exception of the West North Central and Pacific reported above-normal cooling degree-days, ranging up to 40 percent above normal. Despite the warmer-than-normal temperatures, net injections into storage were above the 5-year average, indicating an easing in supply available for storage.

Storage Table

More Storage Data
Other Market Trends

New 5-Year Leasing Program. The Minerals Management Service (MMS) announced on July 30, 2008, that the Department of the Interior will initiate a new 5-year oil and gas leasing program for the Outer Continental Shelf. This program is intended to provide the next administration a 2-year lead in developing a new 5-year program. The current program runs from 2007-2012 for Outer Continental Shelf oil and gas leasing. MMS is soliciting information on whether to begin a new program to run from about the middle of 2010 to about the middle of 2015. The multi-year process starts with a call for information from all parties on what a new 5-year program should consider. MMS also is requesting comment to ensure that all interests and concerns are considered regarding oil and gas leasing and exploration and development resulting from a new 5-year program. The governors of all 50 States will be specifically asked for their comments, particularly on issues unique to each State. The new leasing program is the result of the recent lifting of drilling moratoria by President Bush and the Nation’s current energy situation. During the past 2 years, the price of oil has about doubled to more than $120 per barrel. Today’s energy prices and the widening gap between U.S. energy consumption and supply have changed the assumptions on which many of the decisions were based in the current 5-year program, which includes 21 lease sales in 8 of the 26 Outer Continental Shelf planning areas located in the Gulf of Mexico, Alaska, and the Atlantic. MMS is seeking comments from the public by September 15, 2008.

Natural Gas Drilling. The number of natural gas rigs drilling reached 1,555 for the week ended July 25, 2008. This is the record high for rigs drilling for natural gas. Rigs drilling for natural gas made up about 79 percent of the U.S. total rigs drilling for the week ended July 25. Natural gas rigs were 5 percent higher than those drilling during the same week last year. Natural gas rigs have continued to increase steadily since January 18, 2008, when they hit a relative low of 1,401.

Natural Gas Transportation Update

  • Texas Eastern Transmission Corporation has completed repairs at its Monroe Compressor Station in northeast Louisiana, and has lifted restrictions on interruptible services. The compressor unit outage lasted about 8 days, during which time flows were restricted between Texas Eastern and interconnecting pipelines such as CenterPoint Energy Gas Transmission Company.

  • ANR Pipeline Company has initiated unplanned maintenance at its St. John, Indiana, compression station. As a result, the pipeline company on Monday, July 28, implemented restrictions for eastward flows from St. John. Capacity had been reduced by 189 million cubic feet (MMcf) per day through July 31, after which the restriction will apply to 45 MMcf per day through August 13. Despite the restrictions, at least 1,100 MMcf per day of capacity will still be available. The capacity reductions may result in the curtailment of Interruptible and Firm Secondary services, ANR said.

  • Noting increased demand from temperatures exceeding 90 degrees, Florida Gas Transmission Company implemented procedures for ensuring proper deliveries of supplies. The pipeline issued an Overage Alert Day, which requires shippers to balance their loads more accurately (with a tolerance for negative daily imbalances set at 25 percent) or face penalties.

  • Enterprise Products Partners, L.P., on Wednesday, July 30, suspended operations at its Independence Hub platform for inspections of repairs on the Independence Trail pipeline. The outage is expected to last 4 days, during which supplies of about 900 MMcf per day will be shut-in. The outage has been planned to confirm the status of repair work completed earlier this year, when the Independence Hub was shut for more than a month.

  • Northwest Pipeline Corporation on August 5 will cease accepting storage injections by customers with interruptible contracts (or contracts that do not guarantee service during high demand periods) at Jackson Prairie Storage Facility in Lewis County, Washington. All interruptible storage holders at Jackson Prairie who have a balance must bring it to zero by the end of the August 15 gas day, the pipeline company said.

See Weekly Natural Gas Storage Report for additional Natural Gas Storage Data.
See Natural Gas Analysis for additional Natural Gas Reports and Articles.
See Short-Term Energy Outlook for additional Natural Gas Prices, Supply, and Demand.