Natural Gas
Natural Gas Weekly Update Archive
for week ending August 13, 2008 | Release date: August 14, 2008 | Previous weeks
Next Release: August 21, 2008
| Overview | Prices | Storage | Other Market Trends | Natural Gas Transportation Update |
- Since Wednesday, August 6, natural gas spot prices decreased at all markets in the Lower 48 States, with prices falling between $0.20 and 0.77 per million Btu (MMBtu) at most locations. Prices at the Henry Hub fell $0.59 per MMBtu or about 7 percent, to $8.11 per MMBtu—its lowest level since February 8, 2008.
- At the New York Mercantile Exchange (NYMEX), the futures contract for September delivery at the Henry Hub settled yesterday (August 12) at $8.456 per MMBtu, declining $0.31 or about 4 percent since Wednesday, August 6.
- Natural gas in storage was 2,567 billion cubic feet (Bcf) as of August 8, which is about 0.2 percent below the 5-year average (2003-2007), following an implied net injection of 50 Bcf.
- The spot price for West Texas Intermediate (WTI) crude oil decreased $2.61 per barrel on the week to $115.96 per barrel or $19.99 per MMBtu. Crude oil prices are now $29.35 per barrel, or 20 percent, below the record level of $145.31 per barrel established on July 3.
Natural gas spot prices decreased on the week (Wednesday-Wednesday) at all market locations, with declines ranging between $0.20 and $0.77 per MMBtu, or 3 to 11 percent. The price declines over the period likely can be attributed to the restoration of natural gas production in the Gulf of Mexico and the delayed return to operation of the Independence Hub in the wake of Tropical Storm Edouard, moderating cooling-demand for natural gas, falling crude oil prices, and the strengthening U.S. dollar, which gained about 3 percent against the Euro and about 1 percent against the Canadian dollar since last Wednesday, August 6.
On a regional basis, prices declined between 4 and 11 percent since last Wednesday, August 6. By far the largest regional average price declines occurred in the Florida region with prices falling $1.12 per MMBtu, or 11 percent since last Wednesday, whereas price declines in other regions were less than 66 cents per MMBtu. Prices in the producing region along the Gulf of Mexico fell between $0.58 and $0.66 per MMBtu, or about 7 percent, on the week. Price decreases in the West were the smallest with prices in the Arizona/Nevada and California regions falling about 33 cents per MMBtu on average. The Midcontinent and Rocky Mountains regions posted average regional declines of 56 to 58 cents per MMBtu, or about 8 percent.
As a result of the declines since last Wednesday, prices are now at their lowest levels since February. At $8.11 per MMBtu, the Henry Hub spot price for natural gas is at its lowest level since February 8, 2008, and $1.81 below the level reported on April 1 at the start of the injection season. However, despite the declines since last Wednesday, prices at the Henry Hub remain at historically high levels for this time of year.
Natural gas production in the Gulf Mexico was restored following the shut-ins precipitated by Tropical Storm Edouard, and the completion of a maintenance project on the Independence Hub. Tropical Storm Edouard led to some shut-ins of natural gas production in the Gulf of Mexico. According to the Minerals Management Service (MMS), shut-ins were reported from August 4 through August 7, peaking at 946 million cubic feet per day on August 5 as 154 platforms and 9 rigs were evacuated. By August 7, no production facilities remained evacuated, and the MMS issued its final report on Edouard’s impact, noting that only 22 million cubic feet per day of production remained shut-in. Over the 4-day period, roughly 2.3 Bcf of production was shut-in. A maintenance project on the Independence Hub, which was delayed by Tropical Storm Edouard, was completed on August 7, restoring production of approximately 800 to 850 million cubic feet per day on August 8, when operations were resumed.
At the NYMEX, the prices for natural gas delivery contracts through August 2009 fell between 21 and 33 cents per MMBtu since Wednesday, August 6. Prices for the 12-month futures strip (August 2008 through August 2009) averaged $9.06 per MMBtu as of Wednesday, August 13, falling by roughly 28 cents per MMBtu, or about 3 percent. Contracts for delivery next heating season (November 2008 through March 2009) traded at an average premium of $1.22 per MMBtu relative to the spot price. Price differentials of this magnitude provide suppliers an economic incentive to inject natural gas into storage.
Working gas in storage increased to 2,567 Bcf as of Friday, August 8, according to EIA’s Weekly Natural Gas Storage Report Weekly Natural Gas Storage Report (see Storage Figure). The implied net injection of 50 Bcf into working gas equaled the 5-year average net injection and was 23 Bcf above last year’s net injection of 27 Bcf for the same report week. At 2,567 Bcf, working gas in storage is now 330 Bcf below last year’s level at this time and 6 Bcf below the 5-year average. This is the fifth week in a row that injections into working gas in storage matched or exceeded the 5-year average. The shortfall with respect to the 5-year average and last year’s level peaked on July 4, 2008, at 70 Bcf and 389 Bcf, respectively.
Net injections kept pace with the 5-year average despite warmer-than-normal temperatures in the Lower 48 States. The National Weather Service’s degree-day data (see Temperature Maps and Data)indicate that the Lower 48 States on average posted cooling degree-days 14 percent above normal levels, but 10 percent below last year’s level. On a regional basis, cooling degree-days exceeded normal levels in all regions outside the Northeast, where cooling degree-days were 27 percent below normal levels in the New England Census Division and equal to the norm in the Middle Atlantic Census Division. Compared with last year at this time, cooling degree-days were below last year’s levels in all Census Divisions outside of the West South Central, Mountain, and Pacific Divisions.
EIA Releases August Short-Term Energy Outlook. The spot price of natural gas at the Henry Hub, which currently remains at high levels, is expected to average about $10 per thousand cubic feet (Mcf) in 2008 and about $9 per Mcf in 2009, according to the Energy Information Administration’s (EIA) latest Short-Term Energy Outlook (STEO). In July 2008, the average Henry Hub spot price was $11.45 per Mcf, decreasing by $1.62 per Mcf below the June level. The July price decline marked the end of consecutive increases in the monthly average price that began in October 2007. Natural gas consumption in all sectors is expected to increase by 3 percent in 2008 and by 1.7 percent in 2009. The most significant increases are expected to occur in the electric power sector with a 3.4 percent increase in 2008 and 3.1 percent increase in 2009. Marketed natural gas production is projected to increase by 8.0 percent in 2008 and by 3.7 percent in 2009, whereas imports of liquefied natural gas (LNG) are expected to remain below the levels of recent years. LNG imports are expected to total about 390 Bcf in 2008, which is 381 Bcf less than the 2007 total, and then reach 480 Bcf in 2009. As of August 1, 2008, working natural gas in storage was 2,517 Bcf, which was 6 Bcf lower than the 5-year average and 353 Bcf lower than the level during the corresponding week last year.
- El Paso Natural Gas Company reduced capacity at its Bondad Compressor Station near Ignacio, Colorado, by 134 million cubic feet (MMcf) per day through today, August 14. The scheduled maintenance, which is required to exchange equipment components, reduced net capacity at Bondad to 611 MMcf per day from base capacity of 745 MMcf per day.
- CenterPoint Energy Gas Transmission Company on Tuesday, August 12, began scheduled maintenance at Perryville Compressor Station in northeast Louisiana. During the maintenance (which is scheduled to last up to 10 days), Centerpoint will not be able to receive or deliver supplies to two Southern Natural Gas interconnects and an interconnect with DCP Midstream Partner’s-owned Pelico Pipeline system.
- Rockies Express Pipeline Company is performing maintenance at its Echo Springs Compressor Station this week (Monday through Friday, August 11 — 15). Nominations will not be scheduled at the Echo Springs point, which is located in Carbon County, Wyoming.
- Colorado Interstate Gas (CIG) Company now expects significant repair work will be needed at its Niobrara Compressor Station on its Northeast Colorado Lateral in Washington County, Colorado. After experiencing an unexpected outage on August 7, CIG declared a force majeure event and said the station capacity was being reduced to zero (from 44 MMcf per day) Repairs are estimated to be completed next week (week starting Monday, August 18).
- Gulf South Pipeline Company has scheduled maintenance for its Unit #3 at its compressor station in Jackson, Mississippi, on Monday, August 18. The work, which could last up to 12 days, could reduce capacity through the station by as much as 100 MMcf per day, Gulf South 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.