for week ending October 15, 2008 | Release date: October 16, 2008 | Previous weeks
Overview | Prices | Storage | Other Market Trends | Natural Gas Transportation Update |
Natural gas spot prices increased on the week at most market locations, with increases of up to 76 cents per MMBtu. Since Wednesday, October 8, natural gas prices exhibited considerable resilience despite falling crude oil prices and the general softening of the economy. Factors contributing to the relative strength of natural gas prices likely include the imminent advent of the 2008-2009 heating season, a cooling trend in some parts of the Lower 48 States, and continuing production shut-ins of 2.7 Bcf per day in the Gulf of Mexico. However, there may be an unusual degree of uncertainty surrounding price expectations. The volatility in the financial markets seems to be contributing to heightened uncertainty in natural gas markets about the upcoming heating season. Additionally, downside risks to natural gas prices remain significant. With storage levels at 3,277 Bcf and 3 weeks remaining before the heating season, it appears increasingly likely that natural gas stocks will exceed 3,400 Bcf by October 31. Further, the impact of the softening economy on natural gas demand—particularly in the industrial sector—remains unknown.
The largest average regional price increases occurred in the Midcontinent and Rocky Mountains regions, with prices at most markets in the regions climbing between 27 and 76 cents per MMBtu, or 10 to 27 percent, since last Wednesday, October 8. Cooling temperatures in the Midcontinent and Rocky Mountains regions likely contributed to the price hikes, as prices gained 47 and 44 cents per MMBtu, respectively, since last Wednesday. The Florida region posted the next largest increase, as prices climbed by 20 cents per MMBtu. Price increases elsewhere in the Lower 48 States were less pronounced, with increases of less than 15 cents per MMBtu in the Louisiana, Alabama/Mississippi, Midwest, and East and South Texas regions.
In contrast to the pattern of rising prices elsewhere in the Lower 48 States, prices in the California, Arizona/Nevada, and West Texas regions posted declines since last Wednesday. Relatively mild temperatures and light weather-related demand in the Southwest likely contributed to the declines, as prices fell between 9 and 48 cents per MMBtu on average in the regions. By far the largest declines since last Wednesday occurred in the Southern California region, where prices fell between 79 and 84 cents per MMBtu.
Prices at most market locations in the Lower 48 States are significantly below the levels reported last year at this time. Prices at the Henry Hub are at their lowest levels since November 9, 2007. Compared with last year at this time, the natural gas spot price at the Henry Hub is 45 cents per MMBtu, or 6 percent, below last year’s level.
At the NYMEX, the prices for natural gas delivery contracts through October 2009 fell between 15 and 34 cents per MMBtu, or 2 to 4 percent, since Wednesday, October 8. Prices for the 12-month futures strip (November 2008 through September 2009) averaged $7.11 per MMBtu as of Wednesday, October 15, falling by roughly 28 cents per MMBtu, or about 4 percent on the week. Contracts for delivery next heating season (November 2008 through March 2009) averaged $6.98 per MMBtu, and traded at an average premium of 34 cents per MMBtu relative to the spot price.
Working gas in storage increased to 3,277 Bcf as of Friday, October 10, according to EIA’s Weekly Natural Gas Storage Report (see Storage Figure). The implied net injection of 79 Bcf into working gas was 16 Bcf or 25 percent more than the 5-year average net injection of 63 Bcf, and was 30 Bcf above last year’s net injection of 49 Bcf for the same report week. Working gas stocks are now 87 Bcf below last year’s level at this time compared with the peak difference of 389 Bcf as of July 4, 2008. Working gas is 85 Bcf above the 5-year average. To match last year’s level at the start of the heating season, working gas stocks would have to increase 258 Bcf over the last 3 weeks of the heating season, or about 86 Bcf per week, exceeding the 5-year average injection over the period by about 30 percent.
Mild temperatures in the Lower 48 States mitigated weather-related demand for natural gas, and contributed to the magnitude of net injections into working gas storage. The National Weather Service’s degree-day data (see Temperature Maps and Data) indicate that temperatures in the Lower 48 States were close to normal levels, with average temperatures in each Census Division ranging between 51 and 70 degrees Fahrenheit. These relatively mild temperatures would not result in significant natural gas demand for heating or cooling.
EIA Requests Comments Regarding Release Policies for Weekly Data Reports. The Energy Information Administration (EIA) has issued a Federal Register notice to solicit comments on the process and technologies used for disseminating weekly information regarding petroleum and natural gas stocks in the Weekly Natural Gas Storage Report (WNGSR) and the Weekly Petroleum Status Report (WPSR). EIA has attempted to develop its current dissemination processes and information technologies to meet its goal of providing fair access to any interested user, but has recently faced significant challenges in this area that may require changes to be made. EIA is asking for public comment on a range of issues concerning release of its weekly information. Key issues include the following.
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.