Natural Gas

• Since Wednesday, May 27, natural gas spot prices rose at most market locations in the Lower 48 States, with increases ranging up to 45 cents per million Btu (MMBtu). Prices at the Henry Hub climbed by 32 cents per MMBtu, or about 9 percent, to $3.81 per MMBtu.
  
• At the New York Mercantile Exchange (NYMEX), the futures contract for July delivery at the Henry Hub settled yesterday, June 3, at $3.766 per MMBtu, increasing by 13 cents or about 4 percent during the report week.
  
• Natural gas in storage was 2,337 billion cubic feet (Bcf) as of May 29, which is about 22 percent above the 5-year average (2004-2008), following an implied net injection of 124 Bcf during the report week.
  
• The spot price for West Texas Intermediate (WTI) crude oil increased by $2.73 per barrel since Wednesday, May 27, to $66.14 per barrel or $11.40 per MMBtu.

Natural gas spot prices posted gains at most market locations east of the Rockies since Wednesday, May 27, despite relatively moderate temperatures in the Lower 48 States and robust levels of natural gas in storage. Natural gas spot prices at most market locations increased by up to 13 percent this trading week. In most cases, double-digit price gains at all markets on Friday, May 29, exceeded double-digit declines in trading on Wednesday, June 3, leading to net increases on the week. Factors contributing to rising natural gas prices likely included increased cooling demand for natural gas and rising crude oil prices. Additionally, general macroeconomic conditions, including a weaker U.S. dollar and signs of an incipient recovery in the U.S. economy, appear to be contributing to the recent rally in natural gas prices. Despite the broad-based price increases since last Wednesday, prices at many market locations serving the western Lower 48 States, including California, Arizona/Nevada, the Rocky Mountains, and West Texas, posted declines of as much as 13 cents per MMBtu. Nevertheless, the western markets followed the prevailing national pattern with increasing prices in trading heading into the weekend, and significant declines in trading on Wednesday, June 3.

On a regional basis, natural gas prices increased by up to 34 cents per MMBtu, or 10 percent in most regions, since last Wednesday, May 27. Price increases were largest in the South Texas, East Texas, Louisiana, and Midwest regions, where prices climbed by more than 8 percent on the week. Prices in the Northeast region gained 6 percent, climbing to $4.07 per MMBtu on average, the highest price in the Lower 48 States. The Rocky Mountains region posted the smallest gain since last week and the lowest price in the Lower 48 States, climbing by 1 cent to $2.58 per MMBtu, on average, as many market locations in the region posted declines since last Wednesday. Prices fell in other western markets, including the West Texas, California, and Arizona/Nevada regions, with price decreases of as much as 7 cents per MMBtu, since last Wednesday, May 27.

Despite the recent increases, natural gas prices at the Henry Hub remain well below last year’s level at this time. At $3.81 per MMBtu on Wednesday, June 3, prices at Henry Hub were $8.05 per MMBtu, or 69 percent, below last year’s level at this time. Current spot prices at market locations in the Lower 48 States are about 71 percent below year-ago levels on average.

At the NYMEX, the prices for natural gas delivery contracts through May 2010 rose by roughly 12 cents per MMBtu, or about 2 percent, during the report week. Prices for the 12-month futures strip (July 2009 through June 2010) averaged $5.14 per MMBtu as of Wednesday, June 3. Prices for the futures contracts for delivery during the remaining injection season months (July through October 2009) posted larger increases than contracts for delivery later in 2009 or in early 2010, climbing between 12 and 20 cents per MMBtu. Prices for delivery in the upcoming months of the 2009 injection season averaged $3.99 per MMBtu, while prices for delivery for the 2009-2010 heating season (November 2009 through March 2010) averaged $5.65 per MMBtu, indicating strong incentives for continued injections of natural gas into storage. Settling at $3.766 yesterday (June 3), the near-month contract was 70 percent below the level reported last year at this time.

Working gas in storage increased to 2,337 Bcf as of Friday, May 29, according to EIA’s Weekly Natural Gas Storage Report (see Storage Figure). The implied net injection of 124 Bcf exceeds last year’s net injection of 102 Bcf and the 5-year average (2004-2008) injection of 94 Bcf for the same report week. Working gas inventories are 546 Bcf higher than year-ago levels and 423 Bcf above the 5-year average. Working gas in storage exceeds historical levels by significant margins in each of the three regions, with the Producing region contributing the majority of the surplus, exceeding the 5-year average by 250 Bcf and last year’s levels by 288 Bcf.

This week marks the twelfth consecutive week, dating back to the week ending March 13, the weekly net change has exceeded the 5-year average net injection. Despite record levels of working gas in storage for this time of year, injections into working gas stocks continue to exceed the 5-year average rate of increase. Since the official beginning of the injection season on March 31, working gas stocks have increased by 672 Bcf or 25 percent more than the 5-year average of 537 Bcf over the same period.

This week marks the first time that working gas stocks exceeded the 2,300-Bcf threshold in May since the weekly series began in 1994. The only other time in the weekly series that working gas stocks exceeded the 2,200 Bcf threshold this early in the injection season occurred for the week ending May 26, 2006, when working gas stocks were 2,243 Bcf.

Relatively mild temperatures occurred in each of the Census Divisions in the Lower 48 States during the week ended April 2, 2009. Based on the National Weather Service’s degree-day data, temperatures in the Lower 48 States during the week were almost 2 degrees warmer than normal and 4 degrees warmer than last year’s levels, on average (see Temperature Maps and Data). Temperatures were warmest in the South Atlantic, East South Central, and West South Central Census Divisions, where average temperatures were at least 73 degrees. Temperatures in these Census Divisions along the Gulf of Mexico contributed to modest cooling demand for natural gas. In contrast to the rest of the Lower 48 States, temperatures in the New England, West North Central, and West South Central Census Divisions were cooler than normal.

NEB Predicts Low Natural Gas Prices This Summer. The Canadian National Energy Board (NEB) released its Energy Outlook Summer 2009 on May 28, 2009. The report forecast that energy prices are likely to continue to fall this summer as a result of weak demand, the current economic downturn, and high inventories of oil and natural gas. The NEB predicted crude oil would trade in the $50-$60 per barrel range (USD) and natural gas prices would average between $3.20 and $4.20 per million Btu (MMBtu). The NEB noted the contrast of this forecast to the market prices of last summer, when natural gas prices peaked at more than $13 per MMBtu and crude oil reached a high of about $147 per barrel. According to the NEB, supply growth in the United States, high storage levels, and growing liquefied natural gas imports are also likely to put downward pressure on natural gas prices. However, declining rig activity and increases in the use of natural gas for electric power generation may put upward pressure on prices. The full report is available at: http://www.neb.gc.ca/clf-nsi/rnrgynfmtn/nrgyrprt/nrgytlk/tlksmmr2009/tlksmmrsmmr-eng.pdf

• Upon completion of inspections following a pipeline break near its Centralia compressor station in Missouri, Panhandle Eastern Pipe Line Company, LP, said on June 2 that the compressor station will operate at a reduced pressure while repairs are made. The repairs will occur over approximately 2 to 3 months, with flows likely limited between Centralia and Pleasant Hill compressor stations. The rupture occurred on Panhandle’s Line 200 on May 20. Depending upon nominations and system flows, decreased operating pressure may cause Panhandle to limit service to receipts from the Rockies Express Pipeline, the pipeline said.
  
• Gulf South Pipeline, LP, on Wednesday, June 3, revealed plans to perform maintenance at its Hall Summit compressor station in Louisiana. Gulf South will begin about 4 days of maintenance June 23 on all three compressor units at the station. Capacity through Hall Summit could be reduced by as much as 125 million cubic feet (MMcf) per day, the pipeline said. The design capacity of the station is 357 MMcf per day.
  
• Colorado Interstate Gas Company (CIG) on June 1 said it expects an outage at the Keyes South compressor station in Oklahoma to continue until July 30. The outage, which began May 30, has resulted in the reduction of Keyes South capacity from 218 MMcf per day to 200 MMcf per day. CIG also reported beginning service Monday, June 1, on the Wind River Lateral Expansion in Wyoming. With the modifications at the Muddy Gap and Rawlins compressor stations (both located in Wyoming), Wind River Lateral capacity will increase from 82 MMcf per day to 105 MMcf per day, according to the pipeline.
• On Thursday, May 28, Questar Pipeline Company’s Clay Basin storage facility, located in Daggett County, Utah, returned to full operations following the completion of pump repairs at an associated compressor station. Questar said current operating conditions allowed total Clay Basin injection capabilities of 350 MMcf per day.

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.