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Natural Gas Weekly Update

Overview (For the Week Ending Wednesday, December 9, 2009)

  • Natural gas spot prices increased at all trading locations in the lower 48 States since last Wednesday, December 2. The Henry Hub price rose by 60 cents, or almost 13 percent, to $5.27 per million Btu (MMBtu) on the week.
  • At the New York Mercantile Exchange (NYMEX), the price of the January 2010 natural gas contract rose about 37 cents to $4.898 per MMBtu. The Henry Hub spot price was higher than price of the near-month contract during 3 days of the report week.
  • The West Texas Intermediate crude oil contract fell by $5.95, or 8 percent, to $70.67 per barrel or $12.18 per MMBtu.
  • Working natural gas in storage fell 64 billion cubic feet (Bcf) to 3,773 Bcf during the week ending Friday, December 4, according to EIA's Weekly Natural Gas Storage Report. Inventories are 14 percent above their levels 1 year ago, and 16 percent above the 5-year (2004-2008) average.
  • The natural gas rotary rig count displayed no net change during the week and remained constant at 748, according to data Baker Hughes Incorporated released. While the rig count is at its highest since April 2009, the current level is almost 48 percent below the year-ago count of 1,428.

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
Prices
Since last Wednesday, natural gas spot prices increased at all market locations in the lower 48 States, climbing to more than $5 per MMBtu. Increases ranged between 44 cents and $1.39 per MMBtu, and price increases for the county as a whole averaged 67 cents. The Henry Hub natural gas spot price rose above $5 per MMBtu for the first time since February 4, 2009, ending trading yesterday at $5.27 per MMBtu. Yesterday's price is the highest since January 14, 2009. The Henry Hub price is only 30 cents lower than its year-ago level of $5.57 per MMBtu. Frigid temperatures throughout the country, which brought a rare snowfall to Houston, Texas, likely contributed to price increases. Two cold weather systems developed in the United States, one affecting the Gulf, Southeast, and Northeast, and another affecting California, the Pacific Northwest, and the Rockies.

Frigid temperatures throughout the country pushed prices above $6 at many points in the Northeast United States. Prices were highest in the country at the Algonquin Citygate, which serves New England markets, at $6.64 per MMBtu, rising $1.39 over the week. Other pricing points in the Northeast displayed similar patterns, with many increasing by more than $1 per MMBtu.

Capacity limitations also likely contributed to some price runups during the week. For example, Colorado Interstate Gas declared a force majeure on its Totem Storage Facility, bringing withdrawal nominations to zero, according to Bentek Energy. Bentek also noted a number of pipeline restrictions in the Pacific Northwest. Most notably, restrictions on the Northwest Pipeline resulted in a capacity loss of 38 million cubic feet (MMcf) per day. Upward pressure was evident at the Northwest Sumas point in Washington State, where prices increased by 85 cents to $6.04 per MMBtu on the week. Other capacity limitations may have created similar localized effects on prices, as a number of interstate pipelines limited flexibility for imbalances (See Transportation Section).

Spot Prices

NYMEX prices increased about 37 cents on the week to $4.898 per MMBtu. Before falling at the end of the report week, the near-month contract jumped to $5.114 per MMBtu on Tuesday, December 8. Compared with this time last year, the current price of $4.898 per MMBtu is 12 percent lower. For 3 days during the report week, the Henry Hub spot price exceeded the price of the near-month contract, likely the result of cold weather during the week. All contracts in the 12-month strip (January through December 2010) rose during the week, with months in early 2010 posting the largest gains. The average of the 12 contracts rose from $5.047 per MMBtu on December 2 to $5.331 per MMBtu on December 9, falling from somewhat higher intraweek levels.


Wellhead Prices More Price Data
Storage
Working gas in storage dropped 64 Bcf during the week ending Friday, December 4, according to the Weekly Natural Gas Storage Report (see Storage Figure). Working gas in storage posted the first net weekly withdrawals on a regional and national basis during the report week. Working gas inventories declined to 3,773 Bcf. The net withdrawals exceeded the median of market expectations of 45 Bcf, which Bloomberg reported. Nevertheless, inventories remain about 14 percent above their levels last year, and 16 percent above the 5-year (2004-2008) average. Although the heating season officially began on November 1, net injections have continued through November on a national basis. Despite exceeding market expectations, the net withdrawals were less than the 5-year average withdrawal of 90 Bcf, and below the withdrawal of 66 Bcf for the same period last year. All three storage regions recorded net withdrawals for the report week.

Temperatures during the report week varied across the United States. In the New England Census Division, temperatures were 7.4 degrees warmer than normal and 7.1 degrees warmer than last year's levels (see Temperature Maps and Data). The average temperature for the week was 44.1 degrees. On the other hand, temperatures in the West South Central averaged 49.7 degrees, or 1.9 degrees cooler than normal and 2.7 degrees cooler than last year. The coldest temperatures in the country were in the West North Central, with a weekly average temperature of 36.3 degrees.

Storage Table

More Storage Data Other Market Trends EIA Projects Spot Price Increases in the December Short-Term Energy Outlook. EIA on December 8 released its latest Short-Term Energy Outlook (STEO). According to the latest STEO, the spot price of natural gas at the Henry Hub is expected to average $4.62 per thousand cubic feet (Mcf) in 2010, which is $0.67 per Mcf higher than the estimated 2009 price of $3.95 per Mcf. The spot price of natural gas at the Henry Hub averaged $3.77 per Mcf in November, which was $0.35 per Mcf lower than the average spot price in October. Warmer-than-normal weather in November reduced seasonal residential and commercial space-heating consumption by about 7 percent, falling below the projected consumption in the November STEO and depressing prices. The December 2009 STEO projects an increase in spot prices as space-heating demand rises in the coming months. However, strong domestic production, a retrenchment of electric-power-sector natural gas demand, and uncertainty about the extent of recovery in the industrial sector may limit sustained upward price movements through the winter and well into next year. Total marketed natural gas production is expected to increase by 3.7 percent in 2009, but decline by 3.1 percent in 2010. Minimal hurricane disruptions and significant growth in production from onshore shale basins contributed to the increase in domestic supply over the year. Total natural gas consumption is expected to decrease by 1.9 percent in 2009 and by an additional 0.4 percent in 2010. Consumption growth in the electric power sector partially offset a sharp decline in the industrial sector and smaller, yet significant, declines in the residential and commercial sectors during 2009. Inventories of working natural gas in underground storage reached a new record high of 3.84 trillion cubic feet (Tcf) as of November 27. Mild weather throughout much of the country contributed to unusual storage build during November.

Year-to-Date Industrial Natural Gas Consumption Falls in 2009. Industrial natural gas consumption (excluding lease and plant fuel) has markedly decreased in 2009, according to EIA's November 2009 Natural Gas Monthly. Year-to-date, U.S. industrial consumption has fallen 11 percent compared with the same period (January through September) in 2008. Comparing the same periods on a per State basis, the two largest industrial consuming States, Texas and Louisiana, are down 14 and 8 percent, respectively. In percentage terms, North Dakota had the largest decrease of 35 percent, largely because an ammonia plant was shut in for the majority of 2009 because of lack of demand. The few States showing increases in industrial consumption, such as Maryland, Delaware, Connecticut, and Rhode Island, comprise less than 1 percent of industrial consumption.

Year-Over-Year Changes in Industrial Natural Gas Consumption, First Three Quarters of 2009 Compared With First Three Quarters of 2008

Industrial Consumpton Map



Natural Gas Transportation Update

  • Several interstate pipelines issued operational notices limiting flexibility for imbalances this week, citing extreme weather conditions and high demand for transportation services. Mississippi River Transmission Corporation implemented a System Protection Warning (SPW) effective Wednesday, December 9, until further notice. The SPW restricts deliveries north of Glendale, Mississippi, for customers with interruptible service contracts. In the Midwest, Natural Gas Pipeline Company of America (NGPL) and Northern Natural Gas Company on December 9 also issued restrictions as a result of the coldest temperatures of the season in their service territories. Effective December 9 until further notice, NGPL said it had has reached full capacity for storage withdrawals for customers without firm service contracts. Northern Natural Gas yesterday informed shippers that it would implement tariff restrictions to limit shipper flexibility and maintain system integrity during the cold spell.
  • As cold weather moved across the country, pipeline companies with market areas in the Northeast prepared for large-scale demand increases. Citing, "impending cold weather and high demand," Texas Eastern Transmission Corporation (TETCO), a subsidiary of Spectra Energy Corporation, on Tuesday announced it planned to require all delivery point operators to keep actual daily withdrawals from the system less than or equal to scheduled quantities. This balancing of receipts and deliveries, which will be effective December 10, should occur regardless of their cumulative imbalance position, according to the pipeline company. Furthermore, TETCO may force a balance on certain portions of the pipeline, if necessary, thus reducing nominated quantities. Similar restrictions will be in place on Algonquin Gas Transmission Company, which Spectra Energy also owns.
  • Northwest Pipeline Company on Wednesday, December 9, said that its Jackson Prairie storage facility in Lewis County, Washington, will require maintenance after the discovery of compression problems this week. As a result, the storage field can only deliver about 700,000 decatherms (Dth) per day, or 82 percent of its normal capacity of 850,000 Dth per day. Northwest also reminded customers that emergency tariff restrictions remain in place on its system because of extreme cold in its service territory. Specifically, flow restrictions remain in effect at the Kemmerer and Roosevelt compressor stations, which are located in, respectively, Lincoln County, Wyoming, and Kickitat County, Washington.
  • Southern California Gas (SoCal) on Tuesday said it had regained 300 MMcf per day of storage injection capacity following emergency maintenance at its Aliso Canyon facility near Northridge, California. SoCal lost injection capacity last Tuesday, December 2 because turbo-driven compressors went out of service for emergency repairs.
  • Colorado Interstate Gas Company (CIG) ceased accepting withdrawal nominations from customers for receipts from its Totem Storage facility beginning December 9 because of an unexpected incident. However, CIG said the incident will not affect injections at Totem, which is located in Adams County, Colorado. CIG expects to be able to accept nominations for the full withdrawal capacity for the gas day of December 17.

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