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Natural Gas Weekly Update
Natural Gas Weekly Update Text 0
Released: October 14, 2010 at 2:00 P.M.
Next Release: Thursday, October 21, 2010
Overview (For the Week Ending Wednesday, October 13, 2010)

  • Natural gas spot prices posted gains at most markets across the lower 48 States since Wednesday, October 6, accompanied by double-digit increases in trading since the holiday weekend. Price increases on the week ranged up to 25 cents per million Btu (MMBtu), with the Henry Hub natural gas spot price increasing $0.02 per MMBtu since last Wednesday, averaging $3.58 per MMBtu in trading yesterday, October 13.

  • At the New York Mercantile Exchange (NYMEX), the futures contract for November delivery at the Henry Hub settled yesterday at $3.696 per MMBtu, falling by $0.169, or about 4 percent, since the previous Wednesday.

  • Natural gas in storage totaled 3,590 billion cubic feet (Bcf) as of October 8, about 7.4 percent above the 5-year (2005-2009) average. The implied net injection for the week was 91 Bcf.

  • The spot price for West Texas Intermediate (WTI) crude oil decreased by $0.18 per barrel since Wednesday, October 6, ending the report week at $83.03 per barrel, or $14.32 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

Since last Wednesday, October 6, natural gas spot prices posted gains at most market locations across the lower 48 States. Following declines heading into the holiday weekend, natural gas prices rallied at most market locations, posting gains on the week since last Wednesday. These price increases were influenced by increased consumption in the electric power sector; however, estimates for total consumption were lower this week than last. Prices may also have been influenced by concerns about hurricane activity that could threaten the Gulf of Mexico. Continuing injection demand for storage may also have added to price pressure, as the refill season comes to a close and remaining unused capacity could be exploited. While overall price increases were mostly moderate on the week, the largest increases were in trading points in the Rocky Mountains, where most trading locations posted gains of 15 to 25 cents per MMBtu.

Natural gas spot prices at the Henry Hub are trading significantly below year-ago levels. At $3.58 per MMBtu in trading on October 13, prices at the Henry Hub were 11 percent, or $0.45 per MMBtu, below year-ago levels. Natural gas spot prices at most markets elsewhere in the lower 48 States were trading at about 7 to 26 percent below year-ago levels. The lower spot prices likely reflect robust levels of natural gas production and reduced natural gas consumption compared with last year at this time.

Estimated total weekly natural gas consumption in the lower 48 States decreased since last week, despite increased consumption in the electric power sector during the week. Natural gas consumption during the report week fell from week-ago levels, with decreases in the industrial and residential/commercial sectors more than offsetting increased consumption in the electric power sector, according to estimates by BENTEK Energy, LLC. Total natural gas consumption fell about 2.9 percent since last week, despite an increase of 4.9 percent in the electric power sector. Even while consumption in the electric power sector exceeded year-ago levels by 2.6 percent, total natural gas consumption fell below year-ago levels by 7.12 Bcf per day. This week’s consumption showed significant decreases relative to year-ago levels in both the industrial and residential/commercial sectors, down 8.4 percent and 32.5 percent, respectively, more than offsetting the electric power increase.

Natural gas supplies posted a narrow decrease since last week, resulting from decreased domestic natural gas production. On the week, natural gas supplies fell by 0.3 percent, according to BENTEK estimates, as domestic production fell 0.4 percent on the week. Increased Canadian imports and LNG sendout, which grew 0.1 percent and 2.1 percent, respectively, partially offset the decline in domestic production. Despite posting a slight decline during the week, total domestic natural gas production remains about 5 percent above the level reported last year at this time.

Spot Prices

At the NYMEX, the 12-month strip (or the average price of futures contracts from November 2010 through October 2011) averaged $4.27 per MMBtu in trading on Wednesday, October 13, falling by about $0.10 on the week. The largest weekly declines in the 12-month strip occurred for the November and December contracts, with the contracts for delivery from January 2011 through March 2011 falling 10 cents or less per MMBtu. Prices on the 12-month strip rallied somewhat in trading on Wednesday, October 13, with the November and December contracts gaining 5 to 7 cents per MMBtu, and the remaining contracts gaining about 1 or 2 cents per MMBtu. The 12-month strip averaged $5.69 per MMBtu at the same time last year.

Wellhead Prices Annual Energy Review
More Price Data

Working natural gas in storage increased to 3,590 Bcf as of Friday, October 8, according to EIA's Weekly Natural Gas Storage Report (see Storage Figure). The implied net injection was 91 Bcf, compared with last year's net injection of 60 Bcf and the 5-year average injection of 64 Bcf for the report week. The year-on-year storage deficit decreased from 149 Bcf to 118 Bcf below the 2009 level, marking the fifth consecutive week that the year-over-year deficit has narrowed. Storage exceeds the 5-year average in each of the three storage regions, with the Producing region recording the largest surplus relative to the 5-year average.

Due to the recent run of increases in year-over-year injections, natural gas stocks have been building at a rapid pace. High production and relatively mild weather have caused EIA to revise its outlook for the end of October storage in the Short-Term Energy Outlook (STEO). EIA expects that working gas in storage will end the injection season with levels of 3,726 Bcf at the end of October, just 81 Bcf below 2009 levels.

Temperatures were generally mild and somewhat cooler than normal in the lower 48 States during the week ending October 8. Based on the National Weather Service's degree-day data, temperatures in the lower 48 States during the week were colder than normal on average, but about 1 degree warmer than last year at this time (see Temperature Maps and Data). Temperatures were above average in the New England and Mountain Census Divisions, but below average in the rest of the U.S. Average temperatures ranged from about 53 degrees in the East North Central Census Division to about 65 degrees in the West South Central and Mountain Census Divisions.

Storage Table

More Storage Data
Other Market Trends

EIA Forecasts Increased Prices and Lower Consumption of Heating Fuels This Winter Relative to Last Year. EIA on October 13 released its STEO, which includes its usual monthly projections of primary energy indicators through 2011, as well as an outlook for prices and consumption of winter heating fuels. According to this month’s STEO, average household expenditures for heating fuels will total $986 this winter (October 1 to March 31), which is an increase of 2.5 percent from last winter. Expenditures this winter are expected to be higher for consumers using all heating fuels, except electricity. While prices are projected to be slightly higher this year, warmer than average temperatures are expected to lead to reductions in consumption relative to last year. According to the National Oceanic and Atmospheric Administration (NOAA), temperatures across the country will be 3 percent warmer than last year and 1 percent warmer than the 30-year average during the winter heating season. Temperatures will vary widely by region: the Northeast is projected to be colder than last winter, leading to increases in expenditures for heating oil customers; on the other hand, NOAA expects the South to be 15 percent warmer than last year. EIA expects that inventories of working natural gas in storage will end the injection season at 3,726 Bcf, which would be the second-highest underground storage level for the month of October, with the record occurring last year. According to the STEO, households using natural gas as their primary heating fuel will spend about $27 more this winter, the result of a 6-percent year-over-year increase in prices and a 2-percent decline in consumption. About 52 percent of all U.S. households use natural gas as their primary heating fuel.

STEO Forecasts Show Increased Production and Consumption in 2010. EIA projects that total U.S. marketed production will rise this year from 59.98 Bcf per day last year to 61.29 Bcf per day in 2010. The Henry Hub spot price is higher this year than the 2009 price of $3.95 per MMBtu, averaging $4.47 per MMBtu in 2010. Net imports of natural gas, including pipeline and LNG imports, are expected to drop slightly in 2010 to 7.29 Bcf per day from their 2009 levels of 7.34 Bcf per day. The 2009 level was the lowest since 1994. EIA projects that total natural gas consumption will increase annually by 4.6 percent in 2010. Consumption of natural gas in the industrial and electric power sectors makes up the bulk of the year-over-year increase in consumption in 2010. Consumption of natural gas for electric power generation is expected to average 20.3 Bcf per day in 2010 (compared to 18.87 Bcf per day in 2009), partially due to very warm weather this summer, which led to an increase in electricity demand for cooling. In the industrial sector, natural gas consumption is expected to grow to 17.93 Bcf per day in 2010, compared to 16.69 Bcf per day in 2009. In 2011, marketed production is expected to moderate somewhat to 60.37 Bcf per day, while the Henry Hub spot price is expected to increase to $4.58. Net imports are expected to rise somewhat. Overall consumption is projected to remain relatively flat in 2011, increasing only about 0.1 percent from 2010 levels, as industrial consumption increases slightly and electric power consumption declines somewhat.

Interior Department Lifts Drilling Ban. Ken Salazar, Secretary of the Department of the Interior, announced on October 12, 2010, that deepwater oil and natural gas drilling may resume, effectively ending a moratorium suspending deepwater drilling since July. The moratorium was issued in response to the Deepwater Horizon oil spill in April. Salazar cited an October 1 report from Michael Bromwich, Director of the Bureau of Ocean Energy Management, Regulation, and Enforcement, which showed significant progress in reforms to drilling and workplace safety regulations and standards, increased availability of oil spill response resources, and improved blowout containment capabilities. The moratorium was originally set to expire on November 30, 2010. More information about the drilling ban and recent safety reforms is available here: http://www.doi.gov/news/pressreleases/Salazar-Deepwater-Drilling-May-Resume-for-Operators-Who-Clear-Higher-Bar-for-Safety-Environmental-Protection.cfm

Natural Gas Transportation Update

  • In the Northeast, cooler temperatures are easing concerns over too much supply packed into the regional grid. For example, Tennessee Gas Pipeline Company on Wednesday, October 13, lifted system-wide restrictions that required shippers to maintain an actual daily flow rate not exceeding 2 percent of scheduled quantities, or 500 decatherms (Dth), whichever is greater. The restriction had been in place since October 7.

  • ANR Pipeline Company on Wednesday said that it will undergo unplanned repairs at Sardis Compressor Station in Mississippi, as well as continue maintenance at various compressor stations along its Southeast Mainline (SEML), which stretches from Louisiana to the Great Lakes region. Total SEML capacity will be lower by 315,000 Dth per day through Friday; by 100,000 Dth per day from October 16-19; and by 60,000 Dth per day from Oct. 20-31. Based on current nominations, the above reductions may result in the curtailment of some transportation services, ANR said. SEML capacity is normally about 1,310,000 Dth per day.

  • Texas Eastern Gas Transmission, LP (TETCO) on Tuesday, October 12, announced that it will conduct maintenance at its compressor station in French Lick, Indiana, from Friday through next Monday (October 15-18). During the maintenance, a 24-inch diameter pipe in the region will be blocked on the TETCO line. Based on current nominations, there likely will be a curtailment of some transportation services, according to the pipeline.

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.