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Natural Gas Weekly Update Archive

for week ending December 3, 2008  |  Release date:  December 4, 2008   |  Previous weeks

Released: December 4, 2008
Next Release: December 11, 2008
Overview (For the week ending Wednesday, December 3, 2008)

  • Since Wednesday, November 26, natural gas spot prices decreased at most markets in the Lower 48 States, although selected markets posted relatively modest gains on the week. Prices at the Henry Hub rose 5 cents per million Btu (MMBtu) or less than 0.5 percent, to $6.48 per MMBtu.
  • At the New York Mercantile Exchange (NYMEX), the futures contract for January delivery at the Henry Hub settled yesterday (December 3) at $6.347 per MMBtu, falling 53 cents per MMBtu or about 8 percent since last Wednesday, November 26.
  • Natural gas in storage was 3,358 billion cubic feet (Bcf) as of November 28, which is about 2 percent above the 5-year average (2003-2007), following an implied net withdrawal of 64 Bcf during the report week.
  • The spot price for West Texas Intermediate (WTI) crude oil decreased $7.41 per barrel since last Wednesday, November 26, to $46.79 per barrel or $8.07 per MMBtu. Crude oil prices fell below the $50-mark on November 20 for the first time since May 24, 2005. At $46.79 per barrel, the crude oil price yesterday was at its lowest level since February 9, 2005, and 68 percent below the record-high price of $145.31 posted on July 3, 2008.

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


Despite somewhat chillier temperatures and an imminent arctic blast expected to move into the Midwest, natural gas spot prices remained relatively soft, as prices declined in most market locations in the Lower 48 States. Factors contributing to the relative softness of natural gas prices likely included the robust levels of domestic natural gas production and working gas in storage, falling crude oil prices, and the effects of the weakening economy on industrial demand for natural gas. Furthermore, cold winter temperatures have yet to begin in earnest in most areas of the Lower 48 States. The absence of sustained frigid temperatures thus far in the heating season is doubtlessly mitigating heating demand for natural gas.

Average regional price decreases since last Wednesday, November 26, were widespread with prices falling in markets west of the Rocky Mountains region, the Texas region, and throughout the Northeast region with declines of up to 29 cents per MMBtu, on average. Price increases occurred principally in the Southeast, Midwest, and Midcontinent regions and were relatively modest. Prices in the Rocky Mountains and Arizona/Nevada regions fell 29 and 22 cents per MMBtu, respectively, while prices in California fell 15 cents per MMBtu. The Northeast region posted declines of 27 cents per MMBtu, while markets in the Texas regions recorded the smallest regional average price decreases, falling less than 13 cents per MMBtu, on average. The Midcontinent, Midwest, Louisiana, and Alabama/Mississippi regions posted gains of less than 3 cents per MMBtu on average.

Natural gas prices are significantly below the levels reported last year at this time. As of December 3, natural gas prices are between $0.49 and $1.70 per MMBtu, or 7 to 27 percent below levels at this time last year at most market locations. At the Henry Hub, prices were 50 cents, or 7 percent, below the 2007 level. The year-over-year price declines were even more pronounced in the Northeast region, where prices were more than $3.65 per MMBtu below last year’s levels. Prices at the New York citygate were $7.45 per MMBtu, or about 50 percent, below last year’s level at this time, while prices at the Algonquin citygate, which serves the New England region, recorded the steepest differences relative to last year’s levels with prices falling $10.87 per MMBtu, or nearly 60 percent, below last year’s level.

Spot Prices Spot Prices

At the NYMEX, the prices for natural gas delivery contracts through December 2009 fell between 32 and 49 cents per MMBtu, or 4 to 7 percent, since Wednesday, November 26. Prices for the 12-month futures strip (January 2009 through December 2009) averaged $6.71 per MMBtu as of Wednesday, December 3, declining by roughly 42 cents per MMBtu, or about 6 percent on the week. Contracts for delivery during the rest of the heating season (January through March 2009) averaged $6.36 per MMBtu, and traded at an average discount of 12 cents per MMBtu relative to the spot price.

The December contract for natural gas delivery at the Henry Hub expired in trading on November 24 at $6.89 per MMBtu, gaining nearly 46 cents per MMBtu during its tenure as the near-month contract. At $6.89 per MMBtu, the December 2008 contract expired 32 cents or 4 percent below the expiry of the December 2007 contract. This marks the lowest level for the expiry of a December contract since the December 2003 contract expired at $4.86 per MMBtu.

Wellhead Prices Annual Energy Review


More Storage Data


Working gas in storage decreased to 3,358 Bcf as of Friday, November 28, according to EIA’s Weekly Natural Gas Storage Report (see Storage Figure). The implied net withdrawal of 64 Bcf from working gas was 19 Bcf more than the 5-year average net withdrawal of 45 Bcf, and 2 Bcf below last year’s net withdrawal of 66 Bcf for the same report week. Working gas stocks are now 107 Bcf below last year’s level at this time, and 69 Bcf above the 5-year average.

Colder-than-normal temperatures in the Lower 48 States likely contributed to the above-average level of net withdrawals from 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 below normal levels during the week. On average, heating degree-days were 15 percent above normal in the Lower 48 States. The pattern of colder-than-normal temperatures prevailed throughout most of the Lower 48 States, as each Census Division, excluding the Pacific and Mountain Census Divisions, reported heating degree-days that were between 3 and 51 percent above normal.

Storage Table

More Storage Data

Other Market Trends

EIA Releases Comments Regarding Policies for Weekly Data Reports. On December 2, the Energy Information Administration (EIA) posted comments received in response to an October Federal Register notice on the process and technologies used for disseminating weekly petroleum and natural gas stocks information in the Weekly Natural Gas Storage Report (WNGSR) and the Weekly Petroleum Status Report (WPSR). The comments dealt with several questions regarding appropriate standards of fair information release, timing, possible security policies, and effective technology solutions. Written comments were due on November 14, 2008. EIA anticipates issuing a proposal with any changes in its release process based on these comments in the spring of 2009.

DOE Announces Final Environmental Impact Statement on Energy Corridor Designation in the West. On November 26, 2008, the Department of Energy (DOE) released the Final Programmatic Environmental Impact Statement (Final PEIS) proposing to designate more than 6,000 miles of energy transport corridors on Federal lands in 11 Western States. DOE, Department of the Interior, Department of Agriculture, and Department of Defense all contributed to the preparation of the Final PEIS. The proposed energy corridors would facilitate future siting of oil, gas, and hydrogen pipelines, as well as electricity transmission and distribution facilities on Federal lands in the West to meet the region’s increasing energy demands while mitigating potential harmful effects to the environment. Previous to this collaboration, Federal land management agencies often designated energy corridors and rights-of-way when local projects were proposed. Designating energy corridors using a PEIS allows the participating agencies to mitigate environmental effects and reduce conflicts with other uses of Federal land. The results of this work are expected to speed the process of siting energy infrastructure on Federal lands in the West.

Year-Over-Year Natural Gas Production Declined for the First Time in More Than 2 Years. For the first time since June 2006, monthly U.S. natural gas production was lower than it had been 12 months earlier. The 64.7 Bcf decline in U.S. marketed production compared with September 2007 occurred as hurricane damage resulted in a decline of 150.9 Bcf in the Federal waters of the Gulf of Mexico.

Natural gas marketed production in the Federal Gulf of Mexico in September 2008 declined to its lowest level since the data series began in 1997. Production fell to 68.3 Bcf in September, decreasing more than 68 percent compared with the prior month (Figure 1). The decrease in the September 2008 production is the result of Hurricanes Gustav and Ike, which made landfall on September 1 and 13, respectively, taking much of the offshore production offline. Although production outages associated with the hurricanes have declined from their peak in mid-September of 7.3 Bcf per day (equivalent to 219 Bcf over a 30-day period), according to the Minerals Management Service (MMS), 1.8 Bcf per day (equivalent to 54 Bcf over a 30-day period) of production remained offline in the Gulf as of November 19.

Marketed production in Texas and Louisiana, which includes the onshore and State offshore, decreased in September as well, albeit by smaller percentages. Texas marketed production fell by more than 7 percent compared with the prior month to 560.3 Bcf, while Louisiana production decreased by approximately 20 percent to 91.7 Bcf. As was the case with the Federal offshore, the onshore production in these States was affected by hurricanes. However, shut-in production in Texas for the month of September was offset somewhat by the continued success from unconventional resources, such as the Barnett Shale in the northeast part of the State.

For more information on the latest natural gas data, see the November 2008 edition of the Natural Gas Monthly.

Figure 1. Natural Gas Production in the United States, including Federal Gulf of Mexico, Texas, and Louisiana

Natural Gas Industrial Consumption Declines. Total U.S. industrial consumption in September 2008 declined 11 percent compared with August 2008 to 475.9 Bcf, reaching the lowest monthly consumption level since the data series began in its present form in 2001. The largest falloff in industrial consumption in September occurred in Texas and Louisiana. In fact, EIA estimates that approximately 84 percent of the total U.S. consumption decrease was the direct result of the decline in industrial sector consumption in these two States, which was diminished by the two hurricane landfalls during the month. In the geographic area they affected, Gustav and Ike took much of the natural gas processing, refining, and electric power generation capacity offline. These sectors typically use significant amounts of natural gas as feedstock. On the State level, Texas industrial consumption decreased 24 percent to 93.1 Bcf. Louisiana industrial natural gas consumption fell 27 percent to nearly 53 Bcf. For more information on the latest natural gas data, see the November 2008 edition of the Natural Gas Monthly.

Natural Gas Transportation Update

  • Wyoming Interstate Company (WIC) on December 2 said it had ended an outage of its Douglas Compressor Station in Converse County, Wyoming. The outage, which WIC previously had expected to last through Friday, stemmed from a compressor unit failing at the station. This maintenance work had reduced capacity through the pipeline’s Medicine Bow Lateral from 1,520 million cubic feet (MMcf) per day to 1,120 MMcf per day. The Medicine Bow Lateral provides transportation from the Powder River Basin in Wyoming to the Cheyenne Hub.
  • Colorado Interstate Gas Company said service is now available for flows on its new High Plains system. The High Plains project involved the installation of approximately 164 miles of 24-inch and 30-inch pipeline and 10 measurement facilities in Adams, Morgan, and Weld counties in Colorado. The new pipeline will connect the Cheyenne Hub and Young Gas Storage Company, Ltd., to the northeastern Colorado service area of utility Public Service Company of Colorado and other delivery points in the northeast Colorado area.
  • Effective December 1, Transcontinental Gas Pipeline Corporation (Transco) resumed offering capacity for transportation out of the West Cameron portion of the Gulf of Mexico. Due to damage from Hurricane Ike at its Cameron Meadow processing plant, Transco had been unable to gather, separate, and dry West Cameron system gas. Transco will now re-route West Cameron flows for separation and dehydration to Station 44 in Johnson’s Bay, Louisiana.
  • Transco has notified shippers that it expects colder weather in its market areas to reduce flexibility to manage imbalances on its system. Effective with gas day Friday, December 5, Transco will implement restrictions requiring that all shippers’ daily imbalances be no greater than 5 percent.
  • Following an outage of almost a month, Algonquin Gas Transmission Company has completed repairs at its Burrillville Compressor Station in Rhode Island. Although the outage, which was in effect since November 7, did not result in any immediate interruption of service, the pipeline company had notified shippers that reductions in flows could be required at any time. Repairs at the compressor station were completed on December 3 and pipeline conditions were returned to normal on December 4.

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.