for week ending August 20, 2008 | Release date: August 21, 2008 | Previous weeks
Overview | Prices | Storage | Other Market Trends | Natural Gas Transportation Update |
A reprieve from the summer heat in many areas of the country helped push spot prices lower on the week. The dampening of space-cooling demand in Florida, which was largely the result of Tropical Storm Fay, and the limited threat to offshore production areas contributed to price declines across much of the country. Furthermore, favorable weather conditions in high gas-consuming areas of the Northeast led to some significant price declines in that region on the week. Overall, prices in the Lower 48 States decreased between 1 and 58 cents per MMBtu. Spot prices at the Henry Hub decreased to $8.02 per MMBtu, dropping only 9 cents per MMBtu, or about 1 percent on the week. The Henry Hub traded below $8 between Friday (August 15) and Tuesday (August 19), reaching this level for the first time since early February. The Henry Hub spot price increased almost 30 cents in the last day of the report week to again exceed the $8 mark. However, this location has seen a $2.56 per MMBtu net price decrease over the last month.
The price movement at the Henry Hub mirrored those at most trading locations in the Lower 48 States. As of Tuesday, prices at virtually all market locations in the Lower 48 States had decreased significantly, with price drops ranging between 10 and 83 cents. However, during yesterday’s trading, prices at most points had increased. The biggest 1-day price swings were recorded in the East Texas and Louisiana trading regions, which reacted to both the run-up in the price of crude oil as well as the possibility that Tropical Storm Fay might enter the eastern part of the Gulf of Mexico after all. However, the latest forecast provided by the National Hurricane Center states that Fay was nearly stationary throughout early Thursday morning and is expected to move slowly west-northwest later in the day.
On the regional level, weekly spot prices decreased in all trading regions with the exception of the Rocky Mountains, which recorded an average weekly increase of 21 cents per MMBtu. All trading locations with the exception of Cheyenne Hub and Northwest Sumas in the Rockies saw prices increase on the week, with the highest weekly gain of $1.88 per MMBtu at El Paso Bondad. This week’s price increase at El Paso Bondad was a rebound from the previous week, when prices dropped dramatically as a result of transportation constraints that arose from the capacity reduction at the Bondad compressor station. Other points in the Rockies that rose on the week underwent similar price corrections after several locations experienced transportation related constraints. The Rockies ended the week at an average price of $6.34 per MMBtu. Prices in other trading regions in the Lower 48 States decreased on average, with the most notable declines recorded in Florida ($0.25 per MMBtu), where natural gas demand experienced a significant drop as a result of reduced temperatures related to Tropical Storm Fay. West Texas and Alabama/Mississippi spot prices decreased by an average of 14 cents per MMBtu.
At the NYMEX, the September contract settled at $8.077 per MMBtu, after it traded below $8 the previous 2 days. This week, the near-month contract traded below the $8 mark for the first time since February 6, when the March 2008 contract settled at $7.994 per MMBtu. However, the nearly 20-cent net increase on Tuesday and Wednesday pushed the contract above $8 once again in response to fears over the uncertainty about the future track of Tropical Storm Fay. On the week, however, the contract declined 37.9 cents or 4.5 percent per MMBtu.
Contracts in the 12-month strip all decreased on the week, with the highest weekly price drop occurring in trading for the December 2008 contract. At the end of trading yesterday, the 12-month strip was priced at $8.765 per MMBtu, about 30 cents lower than last Wednesday’s price. The futures contracts for delivery during the heating season (November-March) decreased by an average of 37 cents per MMBtu, and the heating season strip ended the week at $8.973 per MMBtu.
Working gas in storage was 2,655 Bcf as of Friday, August 15, which is 1 percent above the 5-year average inventory level for the report week, according to EIA’s Weekly Natural Gas Storage Report Weekly Natural Gas Storage Report (see Storage Figure). Current stocks are 264 Bcf or 9 percent below last year’s stocks of 2,919 Bcf for the same week, but this week’s injection pushed the current volume in storage above the 5-year average for the first time since the report week ended May 9. Currently, the storage volume stands 26 Bcf or 1 percent above the 5-year average. With average injections through the remainder of the refill season (April to October), working gas stocks entering the heating season would exceed 3,350 Bcf.
The net change of 88 Bcf in the latest storage report is unusually large for August, being the largest net addition to storage in August since 1994. This is also the first time since 2004 that a weekly storage addition exceeded 80 Bcf in August. The net injection into storage of 88 Bcf is 57 percent higher than the 5-year average net injection of 56 Bcf and significantly higher than last year’s injection of 22 Bcf for the week.
Temperatures in the Lower 48 States were cooler than normal during the report week that roughly coincides with EIA’s storage report (see Temperature Maps and Data). Overall, cooling degree-days were 24 percent below normal in the Lower 48 States and about the same compared with last year for the same week. Each Census Division with the exception of the Mountain and Pacific reported below-normal cooling degree-days. Average daily temperatures in the key gas-consuming markets along the northern half of the Lower 48 and in the Middle Atlantic region were 70 degrees or less, well below normal for this time of year.
EIA Releases Report on Sample Changes for the WNGSR. On August 20, the Energy Information Administration (EIA) released a report Discussion of the Sample Changes for the Weekly Natural Gas Storage Report, which provides detail on the recent sample change to the EIA-912 survey, “Weekly Underground Natural Gas Storage Report.” The sample change occurred over a transition period that began with the release of the Weekly Natural Gas Storage Report (WNGSR) on May 22, 2008, and ended with the release on June 12, 2008 (the affected working gas estimates were for weeks ending May 16, 2008, through June 6, 2008). Prior to implementation of the new sample in the published estimates, both samples were used in parallel to estimate weekly natural gas storage stocks from May 4, 2007, through May 9, 2008. EIA prepared a special report that describes the change in sampling procedure for the current sample and examines the differences between results from the old and new samples. Key findings of the report are: there are no statistically significant differences in results based on the old and new samples; the new sample improves the accuracy of the estimates; and the companies in common to both samples account for at least 95 percent of the total volume for the sample companies in each region. The results are compared with the monthly data from the EIA-191 survey, as well as with each other. The report is available at http://www.eia.doe.gov/oil_gas/natural_gas/ngs/ samplechg.html
EIA Enhances the On-line Petroleum and Natural Gas Navigator. EIA has modified its history pages for petroleum and natural gas on its Web site to include a chart displaying the complete history for a particular data series. Furthermore, Excel spreadsheets that contain the entire history within a series are available for download. Lastly, links are available to refer back to its originating navigator pages that show the series in a broader context.
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.