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Natural Gas Weekly Update Archive

for week ending May 27, 2009  |  Release date:  May 28, 2009   |  Previous weeks

Released: May 28, 2009
Next Release: June 4, 2009
Overview (For the Week Ending Wednesday, May 27, 2009)

  • Natural gas spot prices declined this report week (May 20-27), with the largest decreases generally occurring in the western half of the country. During the report week, the Henry Hub spot price decreased by $0.26 per million Btu (MMBtu) to $3.49.
  • At the New York Mercantile Exchange (NYMEX), futures prices decreased as moderate temperatures in most of the country limited demand. The futures contract for June delivery expired yesterday, May 27, at a price of $3.538 per MMBtu, which is the second-lowest monthly closing price for a NYMEX near-month contract in more than 6 years. Meanwhile, the price of the July contract decreased by 46 cents per MMBtu on the week to $3.638.
  • Working gas in underground storage as of last Friday is estimated to have been 2,213 billion cubic feet (Bcf), which is 21.6 percent above the 5-year (2004-2008) average. During the week ending Friday, May 22, the implied net injections of natural gas into underground storage totaled 106 Bcf.
  • The price of crude oil increased by more than 3 percent during the report week. Leading into the Memorial Day weekend (the start of the summer driving season), the West Texas Intermediate (WTI) crude oil price had climbed above $60 per barrel, which is its highest level since last November 2008. After an initial decline, price increases in each of the past 3 trading days resulted in a cumulative increase of $1.96 per barrel since Wednesday, May 20. The WTI average price yesterday was $63.41 per barrel, or $10.93 per MMBtu.

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

Significant price declines in all markets in the Lower 48 States during the report week erased a mid-month run-up in spot natural gas prices. Many spot prices are trading at near 6-year lows, with no daily market prices exceeding $4 per MMBtu and many below $3. The lack of significant weather-related demand during the report week and continued concerns over the economy likely contributed to a decrease in the Henry Hub spot price of $0.26 per MMBtu, or 7 percent. On a regional basis, spot markets along the Gulf Coast in Louisiana and East Texas registered average price decreases on the week of $0.22 and $0.25 per MMBtu, respectively. Average regional prices yesterday were $3.50 in Louisiana and $3.36 in East Texas.

Factors on both sides of the marketplace have contributed to the price declines over the past several months. Recent reductions in natural gas price levels may be related to continued strength in domestic production capacity, specifically related to supplies from unconventional gas fields such as the Barnett Shale in Northeast Texas and the Haynesville Shale in Louisiana. Reduced demand is evident in the industrial sector, which accounts for more than 30 percent of yearly natural gas deliveries, as a result of the decline in economic activity. This decrease in industrial sector demand is occurring at a time when seasonal demand for natural gas is typically low because of lower residential and commercial sector demand, which combined account for more than 35 percent of all deliveries. Weather and economic activity are also affecting demand in the electric power sector, which accounts for almost 35 percent of natural gas demand. This sector does not seem to have begun its summertime surge yet. The combined impact of these influences on the recent natural gas supply and demand balances has resulted in an inordinately high amount of natural gas in storage for this time of year (See storage section below).

Prices at the majority of markets west of the Mississippi River decreased sharply, and regional prices for the Rockies and Midcontinent continue to be the lowest in the country. Price decreases averaged $0.36 per MMBtu in the Rockies, where a decline in weather-related demand because of warmer temperatures has increased concerns over an abundance of supplies amid limited options for storage. At Rockies trading locations, the average price as of May 27 was $2.57 per MMBtu, or 12 percent lower than the previous Wednesday. Midcontinent regional pricing is now well-integrated with Rockies price trends because of increased pipeline capacity between the regions. The price for supplies off Panhandle Eastern Pipeline Company in the Midcontinent finished the week at $2.65 per MMBtu, a decrease of 40 cents from the previous Wednesday.

Temperatures in the Northeast were mild during the report week as rain storms moved through the region during the holiday weekend, contributing to reduced demand and a reduction in the regional price to under $4 per MMBtu. The average price in the Northeast region yesterday was $3.85 per MMBtu, which was $0.29 lower than the previous Wednesday. The Northeast generally experiences the highest prices in the country (outside Florida during the summer), owing in part to pipeline transportation costs for deliveries from the Gulf of Mexico region. For the week, the average spot price for delivery in New York off Transcontinental Gas Pipe Line (Transco Zone 6-NY) decreased by $0.22 per MMBtu to $3.94, which reflects a premium of $0.45 per MMBtu to the price at the Henry Hub.

The pace of deliveries of liquefied natural gas (LNG) imports in recent weeks has increased considerably over the beginning of this year and in comparison with this time last year. Send-out from U.S. LNG import terminals has averaged 1.5 Bcf per day this May, compared to 0.8 Bcf per day in the first quarter of 2009 and 0.8 Bcf per day in May 2008. Although deliveries have not increased to levels recorded in 2007 (when the United States received a record-high volume of 771 Bcf for the year), a greater number of flexible LNG cargoes are being directed to the United States with weak demand elsewhere in the world. U.S. imports of LNG are projected to increase by 43 percent from the level last year to about 500 Bcf in 2009, according to EIA’s Short-Term Energy Outlook (May 2009).

Spot Prices

At the NYMEX, the price of the contract for June delivery decreased by more than 43 cents during the report week, ending trading with the second lowest monthly final settlement price since August 2002 (and the expiry of the September contract). The June contract expired at a price of $3.538 per MMBtu, which represented in increase in value of almost 14 cents from its opening price of $3.403 per MMBtu as the near-term contract. However, the difference in price compared with the June contracts from the previous 2 years is stark: The June 2008 contract expired at $11.916 per MMBtu, while the June 2007 contract expired at $7.591.

At the end of trading yesterday (May 27), the price of the July contract was $3.638 per MMBtu, which was about 46 cents lower on the week. While the price of contracts through the summer experienced similar decreases on the week, prices for next winter declined by less (an average of 32 cents). As of yesterday, the 12-month strip, which is the average for natural gas futures contracts over the next year, was priced at $4.83 per MMBtu, a decrease of about $0.36, or 6.9 percent, since last Wednesday.

Wellhead Prices Annual Energy Review
More Price Data

Working natural gas in storage totaled 2,213 Bcf as of Friday, May 22, 2009, according to EIA’s Weekly Natural Gas Storage Report (see Storage Figure). The implied net injection during the report week was 106 Bcf, bringing the current level of supplies in underground storage to 21.6 percent more than the 5-year average for this time of year. Current stocks exceed the 5-year average by 393 Bcf and last year’s level by 524 Bcf. The average net injection during the comparable week over the past 5 years totaled 91 Bcf, while the net injection for the comparable week last year totaled 87 Bcf.

At 106 Bcf, last week’s net injection is the largest net injection to date this year and larger than any reported in 2008. Reduced demand as a result of the current economic downturn, robust volumes from domestic production, and the significant differential between current spot prices and prices for futures contracts for next winter delivery continue to affect storage activity. Additionally, with the moderate temperatures of springtime during the report week, there was likely little weather-related demand for neither space-heating nor power generation for air-conditioning. Temperatures across the country were quite moderate, averaging 63.6 degrees Fahrenheit compared with a normal average of 63.1 degrees (see Temperature Maps and Data). As a result, the natural gas industry was able to continue the process of building storage inventories at a relatively high rate in anticipation of higher demand levels later in the year.

Storage Table

More Storage Data
Other Market Trends

New Government Website Features EIA Data. The U.S. Federal Government launched a new website last week, www.data.gov, aimed at increasing public access to government data. The website is in its first version and more data sets will be added. Data are available by category, keyword, agency, or data format, and are available for download in XML, Text/CSV, KML/KMZ, Feeds, XLS, or ESRI Shapefile formats. Additionally, the website provides interactive tools for data mining and extraction. The EIA’s Residential Energy Consumption Survey (RECS) is available on data.gov as a featured data set. This survey provides national statistical survey data on the use of energy in residential housing units, including physical housing unit types, appliances utilized, demographics, fuels, and other energy use information. The complete RECS is available on data.gov at http://www.data.gov/details/10 and the consumption data set is available at http://www.data.gov/details/59.

EIA Releases Its Latest International Energy Outlook. The Energy Information Administration (EIA) released the International Energy Outlook 2009, which provides EIA’s outlook for international energy markets through 2030. According to the newly released report, world marketed energy consumption is projected to increase by 44 percent between 2006 and 2030, as a result of strong long-term economic growth in the developing nations of the world. Consumption of energy in nations outside the Organization for Economic Cooperation and Development (Non-OECD) is projected to increase by 73 percent in the IEO2009 reference case, whereas in the OECD countries only 15 percent growth is expected. According to the report, fossil fuels are expected to continue supplying much of the energy used all over the world. In the reference case, natural gas consumption increases from 104 trillion cubic feet (Tcf) in 2006 to 153 Tcf in 2030. Currently, the global economic downturn will dampen world energy demand in the near term, as manufacturing and consumer demand for goods and services slows. However, with economic recovery anticipated to begin within the next 12 to 24 months, most nations are expected to see energy consumption growth at rates anticipated prior to the recession. Total world energy use is expected to rise from 472 quadrillion Btu in 2006 to 552 quadrillion Btu in 2015 and then to 678 quadrillion Btu in 2030. World oil prices have fallen significantly from their July 2008 high mark. As the world’s economies recover, higher world oil prices are assumed to return and persist through 2030.

NOAA Predicts a Near Normal or Above Normal 2009 Hurricane Season. The National Oceanic and Atmospheric Administration (NOAA) released its 2009 hurricane season forecast for the Atlantic region on May 21, 2009. According to the forecast, there is a 50-percent chance of a near normal hurricane season this year, a 25-percent probability of an above-normal season, and a 25-percent probability of a below-normal season. Unlike in recent years, global weather patterns are imposing greater uncertainty on predictions for this hurricane season. NOAA is predicting a 70-percent chance of 9 to 14 named storms in the Atlantic region. Of the named storms, 4 to 7 are expected to become hurricanes and 1 to 3 are expected to become major hurricanes of Category 3 strength or higher. During an average season, there are about 11 named storms. The continuing multi-decadal signal, or the combination of ocean and atmospheric conditions that have spawned increased hurricane activity since 1995, contributed to this year’s hurricane outlook. However, El Niño development in the equatorial Eastern Pacific or cooler-than-normal ocean temperatures in the eastern tropical Atlantic may reduce hurricane activity this season. The hurricane season begins on June 1 and lasts until the end of November.

National Academies’ Report Recommends DOE Change Fuel-Use Measurements. The National Academies recommended in a recent report that the U.S. Department of Energy (DOE) consider gradually changing its system of setting appliance energy-efficiency measures to a full-fuel-cycle measurement, rather than the current system of “site” or point-of-use measurements. The full-fuel-cycle measurement accounts for upstream energy costs, as well as the energy used to operate an appliance, including energy used in producing and distributing fuels from coal, oil, and natural gas, in addition to energy lost in electric power generation and delivery. The current point-of-use measurement reflects only the energy consumed to operate the appliance. The National Academies noted that these measurements allow consumers to compare efficiency among appliances, but offer no information about other energy costs involved. The report found that site measurements are appropriate when setting standards for appliances in the same class using only one type of fuel. However, for appliances using multiple fuel types, or comparing appliances performing the same function but using different fuel types, the full-fuel-cycle measure would provide a more thorough picture of energy use. Two members of the committee that wrote the report dissented from the majority, arguing that DOE should use site measures when setting efficiency standards, because full-fuel-cycle measures would not necessarily help consumers reduce their energy use, and would inevitably favor one fuel. The U.S. Department of Energy sponsored this study. The National Academy of Sciences, National Academy of Engineering, Institute of Medicine, and National Research Council make up the National Academies. The full report can be found at http://www.nap.edu/catalog.php?record_id=12670.

Natural Gas Transportation Update

  • Northwest Pipeline reported that the annual inspection work at the Soda Springs and Muddy Creek compressor stations in Wyoming has been completed earlier than anticipated. The inspection was finished on Friday, May 22, restoring the two points to their design capacity of 654,000 decatherm (Dth) per day for Muddy Creek and 651,000 Dth per day for Soda Springs.
  • Panhandle Eastern Pipe Line Company experienced a line break upstream of the Centralia compressor station in Missouri on its 200 line on Wednesday, May 20. The latest company announcement stated that an investigation into the cause of the rupture was underway. However, based on the operations and scheduling through Pleasant Hill, Illinois, at the time, Panhandle expected that primary firm shipper nominations would be affected.
  • Gulf South Pipeline reported that it will be performing system maintenance on the Whistler Junction compressor station in Mobile County, Alabama, between May 29 and 31. The capacity at this compressor station will be reduced to 0 Dth per day during the maintenance.
  • Southern Natural Gas announced the completion of the required foundation repairs to the Mouldon storage field in Mississippi on May 21. The field was out of service since January 26.
  • Questar Pipeline Company reported yesterday that it discovered a pump leak on unit #3 at its Clay Basin storage facility in Utah. As a result of the leak, the injection capacity at the field was reduced to 325,000 Dth per day so that the unit can be taken off line and repaired. Initially, the pipeline announced that the unit would return to normal injection capacity of 375,000 Dth per day by May 28. However, an update issued by the company indicated that the reduced capacity will remain in effect until further notice as repairs are expected to take longer than initially anticipated.

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.