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Natural Gas Weekly Update Archive

for week ending July 8, 2009  |  Release date:  July 8, 2009   |  Previous weeks

Released: July 9, 2009
Next Release: July 16, 2009
Overview (For the Week Ending Wednesday, July 8, 2009)

  • Natural gas prices posted across-the-board decreases at both the spot and futures markets since last Wednesday. Price decreases at the spot market ranged between 1 and 44 cents per million Btu (MMBtu), although a few points in the lower 48 States posted small increases.
  • During the report week, the price at the Henry Hub spot market fell to $3.22 per MMBtu, decreasing by 11 percent since last Wednesday.
  • At the New York Mercantile Exchange (NYMEX), the natural gas futures contract for August delivery lost 44.2 cents and ended the report week at $3.353 per MMBtu. The price for the August 2009 contract has posted a decrease in each of the trading sessions since becoming the near-month contract on June 29, 2009.
  • As of Friday, July 3, working gas in underground storage rose to 2,796 billion cubic feet (Bcf), with inventories exceeding the 5-year (2004-2008) average by about 19.3 percent.
  • The price of the West Texas Intermediate (WTI) crude oil contract fell by $9.17 per barrel on the week to $60.15 per barrel or $10.37 per MMBtu.
  • Natural gas rigs drilling in the United States increased last week to 688, increasing by 1 rig compared with the previous week, according to Baker Hughes, Incorporated.

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

Moderate temperatures across the lower 48 States outside of Texas and a favorable supply situation led to widespread declines in natural gas spot prices at almost all market locations since last Wednesday, July 1. In addition, the decrease in demand resulting from the holiday-shortened week provided further downward pressure on prices. Prices at market locations east of the Rocky Mountain region recorded the largest declines, with regional decreases averaging between 12 and 37 cents per MMBtu. Prices in the Northeast, where moderate temperatures prevailed for the duration of the report week and dampened cooling load, fell by an average of 35 cents per MMBtu, to a regional average of $3.46 per MMBtu.

Despite high temperatures in Texas, the Gulf of Mexico (GOM) region also recorded significant decreases on the week. While all regions along the GOM coast posted declines, price decreases were particularly striking in Texas, where high temperatures prevailed for much of the report week and significant volumes of natural gas are used for electric power generation. Spot prices in Louisiana decreased by an average of 34 cents, although one point, Mississippi River Transmission Corporation, posted a weekly increase of 8 cents or about 3 percent. As of yesterday, the average price of natural gas in the spot market was $3.21 per MMBtu in Louisiana. Similarly, in the South and East Texas trading regions, natural gas prices fell by 33 and 22 cents, respectively, reaching regional averages of $3.20 and $3.12 per MMBtu, respectively.

Spot Prices

In tandem with falling crude oil prices, futures contracts’ prices at the NYMEX also fell this week, with the August 2009 price sliding 44.2 cents or 12 percent per MMBtu since last Wednesday. The August 2009 contract has decreased in every trading sessions since becoming the near-month contract on June 29, losing a total of 59 cents since that day. Beyond the near-month, all remaining contracts in the 12-month strip also posted decreases this week. The two remaining contracts in the injection season, September and October 2009 contracts, decreased by 47 and 49 cents, respectively. The September contract settled yesterday at $3.478, falling about 12 percent since last Wednesday. The price declines reflect the limited demand for cooling needs and above-average storage volumes. While some uncertainty remains regarding future market conditions, including potential hurricane impacts on production over the next few months, futures prices indicate that the expected inventory levels of natural gas by the end of the injection season may be sufficient to meet the upcoming winter demand. Overall, the 12-month strip fell by $0.409 or 8 percent per MMBtu to $4.850 since last Wednesday.

Wellhead Prices Annual Energy Review
More Price Data

Working gas in storage increased to 2,796 Bcf as of Friday, July 3, according to EIA’s Weekly Natural Gas Storage Report (see Storage Figure). The implied net injection of 75 Bcf fell short of both the 5-year average injection of 90 Bcf and last year’s injection of 89 Bcf. Natural gas in storage is now 601 Bcf or 27 percent higher than year ago levels and 452 Bcf or 19 percent higher than the 5-year (2004-2008) average. At 2,796 Bcf, working gas stocks are at the second-highest level for any week in July since 1994. At 1,013 Bcf, the natural gas stocks in the Producing region are only 61 Bcf below the all-time high for this region established on November 23, 2007. The East region accounted for most of the net injection into storage at 80 percent, which is significantly higher than the more typical 60 percent for this region. At the same time, the Producing region accounted for 16 percent or 12 Bcf. The relatively small amount injected in the producing region undoubtedly reflects the increase in use of natural gas for electric power generation. According to data released by the Edison Electric Institute (EEI), electric output for the week ended July 4 increased more than 11 percent over the corresponding week in 2008 in the region roughly coinciding with the Producing region. While this estimate includes power from all energy sources, the marginal fuel for power generation is generally natural gas, so the volume impact on gas markets is expected to have been significant, particularly in the South of the country. However, EEI noted a 2.1 percent decrease in electric power generation overall in the United States compared with the same week last year.

The below-average net additions to storage occurred despite the relatively weak demand as moderate temperatures prevailed during the week. According to the National Weather Service’s degree-day data, temperatures were moderate during the week ending last Thursday in the United States as a whole. The average temperature in the country was 74 degrees, which was less than 1 degree warmer than normal and about the same as last year’s level (see Temperature Maps and Data). As measured by cooling degree-day data, temperatures in the United States were about 8 percent warmer than normal, however 4 out of the 9 Census Divisions recorded temperatures that were significantly cooler than normal, including Census Divisions in the Northeast and the Midwest that rely on natural gas for electric power generation.

Storage Table

More Storage Data
Other Market Trends

PHMSA Seeks Comment on New Proposed Pipeline Reporting Regulations. In a Notice of Proposed Rulemaking on July 2, the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) proposed revisions to the Pipeline Safety Regulations to improve the reliability and utility of its data collection. PHMSA proposed 11 new regulations intended to enhance the quality of its data and better assess the pipeline industry as a whole. The proposed regulations include changing reporting requirements for explosions or fires; establishing a volumetric basis for reporting unexpected or unintentional natural gas loss; requiring operators to file and report data electronically when possible; requiring operators of liquefied natural gas (LNG) facilities to submit incident and annual reports; and creating and requiring participation in a National Registry of Pipeline and LNG Operators. Comments on the proposed regulation are due by August 31. The notice is available in the July 2 edition of the Federal Register.

Energy Secretary Announces Release of Funds for Weatherization. On July 6, Secretary of Energy Steven Chu announced that the Department of Energy will provide more than $288 million in funding authorized under the American Recovery and Reinvestment Act to support weatherization assistance programs in Arkansas, Iowa, Kentucky, Massachusetts, Michigan, Minnesota, and New Hampshire. The weatherization program will be available to families earning up to 200 percent of the Federal poverty level, or about $44,000 per year for a family of four. The weatherization projects will increase the energy efficiency of homes, allowing recipient households to lower their energy bills. The funding will weatherize about 91,000 homes in the seven States receiving funds. Ten percent of funding allocations were initially announced and released on March 12 to support planning, and comprehensive applications from States were due on May 12. Following a review of the applications, 40 percent of the allocations were awarded on July 6. The remaining 50 percent will be released when States meet reporting, oversight, and accountability measures required by the Recovery Act. More information is available at http://www.energy.gov/news2009/7605.htm.

EIA Releases the July Short-Term Energy Outlook. The Energy Information Administration (EIA) released its latest Short-Term Energy Outlook (STEO) on July 7, 2009. The July STEO projects that the monthly average Henry Hub natural gas spot price will be $3.91 per thousand cubic feet (Mcf) in June, which is 5 cents below May’s average spot price. The monthly average Henry Hub spot price is expected to remain below $4.60 per Mcf through November of this year because of abundant natural gas supplies and weak demand. The Henry Hub spot price is expected to average $4.22 in 2009 and increase by $1.77 to $5.93 per Mcf in 2010. Total natural gas consumption is expected to decrease by 2.3 percent in 2009 and remain steady through 2010 because of declining demand for natural gas as a result of poor economic conditions. Consumption declines are expected to be concentrated in the industrial sector, which is expected to decrease by 8.2 percent in 2009. Electric power sector consumption is expected to increase by 2.4 percent in 2009 because of lower natural gas prices relative to coal and then decrease by 1 percent in 2010. Marketed natural gas production is projected to decrease by 0.6 percent in 2009 and by 2.9 percent in 2010 because of a reduction in natural gas drilling. According to Baker Hughes Incorporated, total working natural gas rigs have fallen 57 percent since September 19, 2008. The decline in natural gas production resulting from the drop in rigs is expected to occur in the lower-48 non-GOM region during the second half of this year. Historically high storage levels and limits to storage capacity may cause prices to decline further this fall despite declining production. Although prices are expected to recover in early 2010 as the market balance tightens, improvements in the productive capacity of domestic onshore supply sources may temper rising prices throughout the forecast period.

Natural Gas Transportation Update

  • Colorado Interstate Gas (CIG) Company on Monday, July 6, said an operational flow order requiring shippers to balance receipts and deliveries will continue. CIG said it is operating at an unusually high load factor despite limitations on storage flexibility. CIG noted improvement in achieving balance in its Fort Morgan and Latigo storage fields in Colorado, but inventories at these facilities on the northern part of the CIG system continue to be near operational limits. No storage injections will be accepted from customers who have contracted for interruptible service. In a separate notice, CIG reported beginning operations at its new Totem Storage Field, which connects with CIG’s High Plains system in Adams County, Colorado. Totem has a working gas capacity of 6 Bcf.
  • Kern River Gas Transmission Company on Tuesday, July 7, reported the completion of repairs to its Goodsprings Compressor Station in northern Nevada. However, the compressor station, which experienced mechanical failure at one of its three units on July 1, will continue to operate at a reduced level until late this week. Capacity through Goodsprings will remain at about 1.5 Bcf per day, or about 200 million cubic feet (MMcf) per day less than its design capacity.
  • Progress continues in bringing the first phase of the eastern portion of the Rockies Express Pipeline (REX) into full operation. Although the pipeline started operations last week from Audrain County, Missouri, to Warren County, Ohio, work at interconnections with other pipelines along its right-of-way continues. On Thursday, July 2, full capacity of 175 MMcf per day became available at the Douglas County, Illinois, receipt interconnect with Trunkline Gas Company. REX also raised the capacity of an interconnection with Panhandle Eastern Pipe Line Company in Putnam County, Indiana, to 100 MMcf per day from 40 MMcf per day. When fully operational, the Panhandle interconnection will have a capacity of 175 MMcf per day. 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 Bcf per day, but the company has already begun preparations to raise the capacity to 1.8 Bcf per day later this year.
  • Mississippi River Transmission (MRT) Corporation on Monday, July 6, lifted a system protection warning (SPW) that had been in effect during the holiday weekend. According MRT, the SPW was necessary because of expected high levels of linepack on the system. As a result, the company prohibited the scheduling of any volumes that resulted in a daily long imbalance position.
  • Enterprise Operating Partners, L.P., experienced an unscheduled outage on Wednesday, July 1, following a valve malfunction the previous morning at its Toca processing plant in southeast Louisiana. As a result of the outage, Southern Natural Gas Company notified shippers that it was concerned about a gas stream above normal Btu or hydrocarbon content. However, Enterprise Operating Partners repaired the valve and the plant resumed full operations Thursday, July 2.

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.