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Natural Gas Weekly Update Archive

for week ending March 18, 2009  |  Release date:  March 19, 2009   |  Previous weeks

Released: March 19, 2009
Next Release: March 26, 2009
Overview (For the Week Ending Wednesday, March 18, 2009)

  • Warmer temperatures moved into major population centers this report week, signaling the imminent end of winter and the corresponding reduction in demand related to space heating. Spot prices continued to decline, with the biggest decreases west of the Mississippi River. During the report week, the Henry Hub spot price decreased $0.17 per million Btu (MMBtu) to $3.75.
  • At the New York Mercantile Exchange (NYMEX), futures prices also decreased as temperatures climbed higher this week. The futures contract for April delivery decreased by 11 cents per MMBtu on the week to $3.68, the lowest close for a near-month contract in about 6½ years.
  • As of Friday, March 13, working gas in underground storage was 1,651 billion cubic feet (Bcf), which is 16 percent above the 5-year (2004-2008) average.
  • The price of West Texas Intermediate (WTI) crude oil increased on the week by $5.66 per barrel to $48.12, or $8.30 per MMBtu. During the week, the WTI daily price reached as high as $48.97 per barrel, which was the highest price for WTI crude oil since December 1, 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

Price changes in the spot market this week reflected seasonal natural gas consumption, as temperatures warmed in most of the country. Decreased space-heating demand in consuming regions reduced the need for storage withdrawals during week, adding to a perception of adequate supplies in the marketplace. Steep price declines resulted throughout the country, with the Henry Hub daily price finishing the report week at $3.75 per MMBtu, a reduction of 17 cents per MMBtu, or 4 percent from the prior week. On a regional basis, spot markets along the Gulf Coast in Louisiana and East Texas registered an average price decrease of $0.18 and $0.33 per MMBtu, respectively. The average regional price yesterday was $3.69 in Louisiana and $3.28 in East Texas. While price movements during the week appeared to reflect changes in weather, recent market trends also reflect altered fundamental conditions in the natural gas marketplace. Most significantly, the economic downturn has resulted in a decline in consumption, particularly in the industrial sector, with many companies announcing layoffs and closures of manufacturing plants around the country.

Prices at markets west of the Mississippi River, with the exception of California, decreased sharply, further depressing regional prices that were already the lowest in the country. Price decreases averaged $0.46 in the Rockies, where the advent of warmer weather has increased concerns over an abundance of supplies amid limited options for storage. At Rockies trading locations, the average price as of March 18 was $2.61 per MMBtu, or 15 percent lower than the previous Wednesday. For supplies moving northwestward, weekly declines were particularly steep. The price for supplies on Northwest Pipeline at Sumas, Washington, decreased $0.84 per MMBtu to $3.27. Midcontinent regional pricing is now well-integrated with Rockies price trends because of increased flows between the regions. The two regions had nearly identical average prices by the end of the report week, with the average price in the Midcontinent falling 46 cents per MMBtu to $2.59. The price for supplies off Panhandle Eastern Pipeline Company in the Midcontinent finished the week at $2.44 per MMBtu, a decline of 41 cents from the previous Wednesday. In addition to the lack of weather-related demand, the abundance of supplies in the Midcontinent region related to production from shale formations likely continues to be an important factor in regional prices.

With the exception of Florida markets, the Northeast region is the only region with spot prices still above $4 per MMBtu. Nonetheless, substantial declines of generally more than 30 cents per MMBtu were registered in the region during the week. The average price as of Wednesday was $4.08 per MMBtu, or 38 cents lower than the prior report week. As temperatures in the Northeast during this report week rose above normal, the premium in the Northeast price over Gulf of Mexico region prices fell from 76 cents per MMBtu to 42 cents. With the arrival of warmer weather, interstate pipelines have more flexibility to transport nonfirm supplies between the two markets and differences in local supply and demand conditions are reduced.

Spot Prices

At the NYMEX, the price of the near-month contract (for April delivery) decreased 11 cents per MMBtu during the report week to $3.684. The increase was attributed chiefly to warmer temperatures moving into consuming regions of the country. The April contract is trading at less than half of its price just 4 months ago because of concerns over the state of the economy and higher-than-average levels of natural gas in underground storage. At the end of trading yesterday, the 12-month strip, which is the average for natural gas futures contracts over the next year, was priced at $4.56 per MMBtu, a decrease of about $0.09, or 2 percent, since last Wednesday.

Wellhead Prices Annual Energy Review
More Price Data

Working gas in storage totaled 1,651 Bcf as of Friday, March 13, 2009, according to EIA's Weekly Natural Gas Storage Report (see Storage Figure). The implied net withdrawal during the report week was 30 Bcf, bringing the current level of supplies in underground storage to 16 percent more than the 5-year average. Industry withdrawals totaled 61 Bcf from storage during the comparable week on average over the past 5 years, while the net withdrawal totaled 85 Bcf for the comparable week last year. For the first time in the history of EIA’s weekly report, the aggregate inventory level in the Producing Region now surpasses natural gas in storage in the East Region. While storage in the East Region is mostly associated with seasonal consumption, storage inventories in the Producing Region fluctuate in response to a host of other variables, including the shape of the forward curve for natural gas prices.

The below-average net withdrawal occurred during a week of slightly warmer-than-normal temperatures across the Lower 48 States. As the National Weather Service degree-day data indicates, the number of heating degree-days (HDDs) totaled 16 percent below normal for the country as a whole, which likely limited space heating requirements. In particular, the number of HDDs in major consuming markets in the Mid-Atlantic Census Division was 28 percent less than normal, while in the East North Central Census Division (which includes Chicago) the number of HDDs was 23 percent less than normal. In general, temperatures in the country were above levels typical for early March with an average overall temperature for the week of 46.4 degrees Fahrenheit, about 3.7 degrees above normal (see Temperature Maps and Data).

Storage Table

More Storage Data
Other Market Trends

EIA to Hold Annual Conference in April. The Energy Information Administration will hold its 2009 conference, A New Climate for Energy on April 7 and 8, 2009, at the Washington Convention Center in Washington, D.C. The conference will focus on the challenges facing the Administration, Congress, the energy industry, and consumers. In the plenary session on the first day, William D. Nordhaus of Yale University will discuss the global financial crisis and its effects on the energy sector, and John W. Rowe of the Exelon Corporation will speak about energy in a carbon-constrained environment. The conference is free of charge. Registration information, an agenda, and a list of speakers are available at the conference’s website.

EIA Releases Assumptions for the Annual Energy Outlook 2009. The Energy Information Administration on March 13, 2009, issued Assumptions to the Annual Energy Outlook 2009, a supplement to the Annual Energy Outlook 2009 (AEO), which will be released later this month. The report includes an overview of the National Energy Modeling System, which is used in the AEO and was developed by EIA to make long-term forecasts and provide policy analyses. The AEO will provide a reference case, low case, and high case for factors such as economic growth and oil prices, as well as cases for technology, liquefied natural gas imports, and other areas. The low cases and high cases are designed to examine the impact of varying key assumptions in the model. The NEMS model currently projects out to 2030 and contains component modules representing supply, demand, and conversion sectors of domestic energy markets, as well as international and macroeconomic modules.

Dallas Fed Finds Slowdown in Gas Drilling Could Lead to Recession in Texas. The Federal Reserve Board of Dallas said in a recent report that the energy industry played a key role in the State of Texas’ relative economic strength in the first half of 2008, but the boost from energy has dropped as natural gas and oil prices have fallen. Citing information from the Beige Book, the Dallas Fed noted that the land-based natural gas industry has borne most of the decline—unconventional drilling in the Barnett Shale and the Permian Basin led the upturn, and also would lead the downturn. The Dallas Fed noted that the rig count in Texas has fallen by about 50 percent from the peak in August 2008, and noted layoffs in the energy industry are becoming widespread and are predicted to grow this year. All metro areas in Texas are likely to experience recessions in 2009, with Austin and Dallas being the hardest hit. However, economic activity in the Houston area could drop sharply, if energy prices fall farther, according to the Dallas Fed. The report is available on the Dallas Fed’s website: http://dallasfed.org/research/swe/2009/swe0901b.cfm.

Natural Gas Transportation Update

  • On Friday, March 13, Northern Natural Gas reported that it kept in place the force majeure initially declared in mid-February for the Matagorda Offshore Pipeline System (MOPS) following a system outage. The latest update provided by Northern Natural Gas indicates that the pipeline has secured the subsea facilities in Matagorda Island block 686 offshore Texas. Furthermore, an investigative dive crew was immediately dispatched to address safety and environmental issues, investigate the cause of the outage, and secure the pipeline. The source of the outage appears to be the failure of a 24-inch coupling that caused the pipeline to separate, opening the pipeline system to seawater. The extent of damage to nearby pipeline components remains uncertain. Northern expects MOPS to return to full service by mid-July 2009.
  • As a result of unseasonably warm weather that is forecasted to continue through the rest of the month of March and with storage inventories at higher than usual levels for this time of year, Colorado Interstate Gas Company (CIG) declared a strained operating condition (SOC) on March 18, which will be in effect March 20 until further notice. The SOC was issued because CIG’s ability to absorb imbalances was impaired by mismatches between scheduled receipts and deliveries, severely limiting the pipeline’s ability to handle storage injections.
  • Texas Gas Transmission announced unscheduled maintenance at the Sharon compressor station in Louisiana, which resulted in reduced capacity at the Sharon Carthage Segment and Texas Eastern location. The combined capacity at this location was reduced to 500,000 MMBtu per day. The pipeline estimated that the maintenance will be complete by March 21.

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.