Natural Gas

• Since Wednesday, June 24, natural gas spot prices fell at most market locations east of the Rocky Mountains, with decreases of as much as 89 cents per million Btu (MMBtu). Prices at the Henry Hub declined by 17 cents per MMBtu, or about 4 percent, to $3.63 per MMBtu.
  
• At the New York Mercantile Exchange (NYMEX), the futures contract for August delivery at the Henry Hub settled yesterday, July 1, at $3.795 per MMBtu, decreasing by 11 cents or about 3 percent during the report week.
  
• Natural gas in storage was 2,721 billion cubic feet (Bcf) as of June 26, which is about 20.7 percent above the 5-year average (2004-2008), following an implied net injection of 70 Bcf during the report week.
  
• The spot price for West Texas Intermediate (WTI) crude oil increased by $1.18 per barrel since Wednesday, June 24, to $69.32 per barrel or $11.95 per MMBtu.

Natural gas spot prices posted declines at most market locations east of the Rockies since Wednesday, June 24, as a result of relatively moderate temperatures in the Lower 48 States and robust levels of natural gas in storage. Natural gas spot prices at most market locations decreased by up to 89 cents per MMBtu, or 25 percent this trading week. However, prices at the Florida citygate exceeded even that benchmark with the largest price decline in the Lower 48 States of $2.60 per MMBtu, or 41 percent, since last Wednesday. Factors contributing to the decline in natural gas prices likely included moderate cooling demand for natural gas and plentiful supplies. In contrast to the broad-based price discounts 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 increases of as much as 26 cents per MMBtu, as warm temperatures in the region contributed to increased electric generation demand for natural gas.

On a regional basis, natural gas prices decreased by up to 36 cents per MMBtu, or 10 percent, in most regions east of the Rockies, since last Wednesday, June 24. Outside of Florida, price decreases were largest in the East Texas and Northeast regions, where prices declined by more than 8 percent on the week. The Rocky Mountains, California, and Arizona/Nevada regions posted gains ranging between 16 and 18 cents per MMBtu since last week. The Rocky Mountain region also posted the lowest average price in the Lower 48 States, at $2.64 per MMBtu.

Natural gas prices at the Florida citygate posted a single day price drop of $2.20 per MMBtu on Monday, June 29. This decline punctuated an extended period since June 15 during which the Florida spot price traded at more than $5 per MMBtu and at a significant premium relative to other locations in the lower 48 States. Prices at the Florida citygate climbed to a peak of $7.54 per MMBtu on June 25 before falling to $4.33 per MMBtu on June 29. Moderating temperatures in the region and the end of an Overage Alert Day on the Florida Gas Transmission Company pipeline that had been in effect since June 16 contributed to the price decline.

At the NYMEX, the prices for natural gas delivery contracts through July 2010 declined by roughly 3 cents per MMBtu, or about 1 percent, during the report week. Prices for the 12-month futures strip (August 2009 through July 2010) averaged $5.26 per MMBtu as of Wednesday, July 1. Prices for the futures contracts for delivery during the remaining injection season months (August through October 2009) posted larger decreases than contracts for delivery later in 2009 or in early 2010, falling between 9 and 11 cents per MMBtu. Prices for delivery in the upcoming months of the 2009 injection season averaged $3.97 per MMBtu, while prices for delivery for the 2009-2010 heating season (November 2009 through March 2010) averaged $5.58 per MMBtu, indicating strong incentives for continued injections of natural gas into storage. Settling at $3.795 yesterday (July 1), the near-month contract was 72 percent below the level reported last year at this time. The futures contract for July delivery expired on Friday, June 26, at $3.949 per MMBtu, falling a little less than a penny during its tenure as the prompt-month contract.

Working gas in storage increased to 2,721 Bcf as of Friday, June 26, according to EIA’s Weekly Natural Gas Storage Report (see Storage Figure). The implied net injection of 70 Bcf was 19 percent below last year’s net injection of 86 Bcf and 18 percent below the 5-year average (2004-2008) injection of 85 Bcf for the same report week. Working gas inventories are 615 Bcf higher than year-ago levels and 467 Bcf above the 5-year average level. 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 252 Bcf and last year’s levels by 301 Bcf.

This week marks the first time in 16 weeks, dating back to the week ending March 13, the weekly net change has not exceeded the 5-year average net change. Working gas in storage is at record levels for this time of year. Since the official beginning of the injection season on March 31, working gas stocks have increased by 1,065 Bcf or 21 percent more than the 5-year average of 878 Bcf over the same period.

This week marks the first time that working gas stocks exceeded the 2,700-Bcf threshold in June since the weekly series began in 1994. If the net injections into storage match the 5-year average (2004-2008) over the remainder of the refill season, working gas stocks would exceed 3,700 Bcf. This level of working gas in storage would exceed the previous all-time record in the history of the weekly series of 3,565 reported at the end of October 2007.

Relatively mild temperatures occurred in each of the Census Divisions in the Lower 48 States during the week ended June 25, 2009. Based on the National Weather Service’s degree-day data, temperatures in the Lower 48 States during the week were, on average, almost 3 degrees warmer than normal and 3 degrees warmer than last year’s levels (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 between 80 and 85 degrees. In contrast to the rest of the lower 48 States, temperatures in the New England, Middle Atlantic, Mountain, and Pacific Census Divisions were cooler than normal.

EIA Releases Natural Gas Monthly with Data through April. The Energy Information Administration on June 29 released the Natural Gas Monthly, which includes monthly data through April 2009. Overall, U.S. natural gas consumption fell 19 percent from March to April, which is consistent with previous years, as a result of the end of the heating season and arrival of warmer weather. According to the new data, industrial natural gas consumption for April was 487 billion cubic feet, which represents a 16 percent decline from January 2009, and an 11 percent decline from the same month in 2008. Overall industrial natural gas consumption in the United States fell 8 percent from March to April, while prices paid by industrial customers fell 12 percent, from $5.70 per thousand cubic feet (mcf) to $5.02 per mcf. Patterns of industrial consumption varied across States, with New Mexico’s industrial gas use increasing 36 percent from March to April, and Massachusetts’ decreasing 22 percent. Industrial consumption increased in many Southern States. On the other hand, residential consumption has remained relatively flat year over year, showing an increase of less than 1 percent—despite much lower natural gas prices in April 2009 than 2008.

• The first phase of the eastern portion of the Rockies Express Pipeline (REX) has started operations from Audrain County, Missouri, through Warren County, Ohio. The extension of the pipeline to the western part of Ohio provides access to the Lebanon Hub, where interconnections are available with Columbia Gas Transmission Company, Texas Eastern Transmission Corporation, and Dominion Transmission Company. In Indiana and Illinois, REX shippers are able to access Natural Gas Pipeline Company of America and Trunkline Gas Company. Full operation of the entire REX-East pipeline to Clarington, Ohio, is projected to begin before November 1, 2009. During this initial service of the eastern portion of the pipeline, REX-East has a capacity of 1.6 billion cubic feet (Bcf) per day.
  
• Noting that its transmission system is operating at an extremely high load factor, Colorado Interstate Gas Company on Monday, June 29, implemented an operational flow order (OFO) requiring shippers to balance receipts and deliveries. The pipeline company also has limited storage and banking flexibility since facilities on the northern part of the system are near operational limits. CIG said no storage injections will be accepted from customers who have contracted for interruptible service. The pipeline also directed shippers with interruptible service to withdraw natural gas currently held in storage by the end of July.
  
• Questar Pipeline Company on Monday, June 29, said it had completed repairs on Unit 2 at Oak Spring Compressor Station in Carbon County, Utah, and said it had restored capacity of its pipeline segment in the region to 500,000 decatherms (Dth) per day. Capacity at the station was reduced to 330,000 Dth per day on Tuesday, June 23, for unscheduled maintenance.
  
• Gulf Crossing Pipeline Company LLC on Tuesday, June 30, said it had completed remediation of the anomalies on its pipeline system and would begin operating at a reduced level immediately. Anticipated peak-day delivery capacity for Gulf Crossing in July is estimated at approximately 1.3 Bcf per day. Flows on Gulf Crossing, which begins near Sherman, Texas, and extends to Perryville, Louisiana, began in February 2009. They were temporarily suspended while the pipeline was inspected by the U.S. Pipeline and Hazardous Materials Safety Administration in June. Gulf Crossing also announced that the Federal Energy Regulatory Commission has granted it authority to expand its Mira Compressor Station in Caddo Parish, Louisiana, to increase peak-day delivery capacity to 1.7 Bcf per day in 2010.

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.