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Natural Gas Weekly Update

Overview (For the Week Ending Wednesday, February 3, 2010)

  • Since Wednesday, January 27, natural gas spot prices rose at most market locations in the lower 48 States, with increases of less than 10 percent on the week. Prices at the Henry Hub climbed $0.09, or about 2 percent, to $5.51 per million Btu (MMBtu).
  • At the New York Mercantile Exchange (NYMEX), the futures contract for March delivery at the Henry Hub settled yesterday, February 3, at $5.42 per MMBtu, increasing by 19.5 cents or about 4 percent during the report week.
  • Natural gas in storage was 2,406 billion cubic feet (Bcf) as of January 29, which is about 7 percent above the 5-year average (2005-2009). The implied net withdrawal for the week was 115 Bcf.
  • The spot price for West Texas Intermediate (WTI) crude oil increased by $3.32 per barrel since Wednesday, January 27, to $76.96 per barrel or $13.27 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
Prices
Since last Wednesday, January 27, natural gas spot prices posted relatively modest increases at most market locations amid continued cold temperatures. Cold winter temperatures throughout most of the lower 48 States and rising crude oil prices likely contributed to rising natural gas prices. On the week, price increases were generally less than 10 cents per MMBtu at most markets. However, market locations in Texas and the Northeast posted gains ranging up to 21 cents and 59 cents per MMBtu, respectively. In contrast to the overall upward trend in most areas, prices at select Rockies and Midcontinent markets declined by as much as 8 cents per MMBtu, or less than 2 percent.

Natural gas spot prices in the Northeast region continue to exhibit considerable strength, despite declines heading into last weekend. Prices in the Northeast posted the largest net gains since last Wednesday, in a week of considerable price variability. As another cold blast moved into the region, prices at several market locations in the Northeast posted gains ranging between $1.15 and $4.13 per MMBtu on Friday, January 29, with the largest increase occurring at the New York Citygate. Moderating temperatures since the weekend contributed to largely offsetting declines in trading on the following Monday, February 1. Ample supplies, including increased LNG sendout, as reported by Bentek Energy, during the weekend, likely mitigated the extent of these price runups. Net gains in the region since last Wednesday ranged between 1 and 10 percent, following gains in trading on Wednesday, February 3 on reports of a new cold front moving in over the weekend.

Natural gas prices at most markets in the Rocky Mountains and Midcontinent regions posted slight declines since last Wednesday, January 27. Prices at most markets in the Rockies fell less than 1 percent, likely because of relatively moderate winter demand for natural gas and continued strong production in the region. The Rocky Mountains Express Pipeline (REX) returned to service on January 27 at 88 percent capacity, and likely contributed to declining prices at many markets in the Midcontinent. Prices in the Midcontinent declined by as much as 5 cents per MMBtu. However, several market locations in the region managed small gains of less than 1 percent.

Natural gas spot prices at the Henry Hub continue to trade above year-ago levels. With the recent cold temperatures over the last several weeks, prices at market locations across the lower 48 States are trading at a premium to year-ago levels. At $5.51 per MMBtu in trading on February 3, prices at the Henry Hub were 9 percent, or 47 cents, above year-ago levels. Elsewhere in the lower 48 States, natural gas spot prices at most markets outside the Northeast region are trading at about 20 to 50 percent above year-ago levels.

Spot Prices

At the NYMEX, the prices for natural gas delivery contracts through February 2011 increased between 12 and 20 cents per MMBtu, or up to 4 percent, during the report week. On the week, the price of the March contract increased 19.5 cents per MMBtu, or about 4 percent, posting the largest gain on the 12-month (March 2010 through February 2011) futures strip. The other remaining 11 contracts on the 12-month strip rose between 12 and 18 cents per MMBtu, or about 2 to 4 percent. Overall, prices for the 12-month futures strip averaged $5.85 per MMBtu as of Wednesday, February 3. The March 2010 contract has traded at a discount to the Henry Hub spot price, suggesting that producers have an incentive to withdraw natural gas from storage to meet current demand.


Wellhead Prices More Price Data
Storage
Working gas in storage decreased to 2,406 Bcf as of Friday, January 29, according to EIA's Weekly Natural Gas Storage Report (see Storage Figure). The implied net withdrawal was 115 Bcf, compared with the 5-year (2005-2009) average withdrawal of 178 Bcf and last year's net withdrawal of 194 Bcf for the report week. Warmer-than-normal temperatures likely contributed to the below-normal rate of withdrawals during the report week. Working gas inventories are 199 Bcf higher than year-ago levels and 150 Bcf above the 5-year average level (2005-2009). Working gas in storage continues to exceed historical levels and year-ago levels for this time of year in each of the three storage regions. Since the first reported net withdrawal of the heating season (for the week ending December 4) through January 29, cumulative withdrawals from storage totaled 1,431 Bcf, or 19 percent greater than the 5-year average of 1,204 Bcf over the same period.

Temperatures were generally warmer than normal in most Census Divisions in the lower 48 States during the week ended January 28. Based on the National Weather Service's degree-day data, temperatures in the lower 48 States during the week ending January 28 were, on average, about 4 degrees warmer than normal and 7 degrees warmer than last year's levels (see Temperature Maps and Data). Temperatures were warmest in the West South Central Census Division, where the average temperature was 52 degrees. Elsewhere in the lower 48 States, average temperatures ranged between 26 and 46 degrees. In contrast to the rest of the lower 48 States, the Pacific Census Division reported colder-than-normal temperatures.

Storage Table

More Storage Data Other Market Trends Natural Gas Consumption Increases in November. On January 29, EIA released the January 2010 Natural Gas Monthly, which includes data through November 2009. Natural gas delivered volumes to residential, commercial, industrial, vehicle fuel, and electric power customers increased about 11 percent, from 48.4 Bcf per day in October to 53.5 Bcf per day in November. The increase occurred largely in the residential sector (likely the result of colder weather in the United States), where natural gas usage jumped from 8 Bcf per day in October to 12.5 Bcf per day in November. Such an increase is not unusual for this time of year. Though October was a very cold month, and November was warm, by historical standards, heating degree-days still increased substantially from month to month, from 331 in October to 442 in November. Commercial and industrial natural gas consumption also increased month-over-month, consistent with patterns in previous years. Residential, commercial, industrial, and electric power consumption were all down from November 2008, likely because of the struggling economy and warmer-than-normal temperatures in November. The wellhead price rose slightly from the previous month, to $3.64 per thousand cubic feet (Mcf), compared with $3.60 per Mcf in October. The November 2009 wellhead price was about 49 percent lower than the 5-year average price of $7.07 per Mcf. Marketed production of natural gas increased slightly from 60.4 Bcf per day in October to 60.6 Bcf per day in November, about 15 percent higher than the 5-year average level. Working natural gas in storage for the month of November was 3,833 Bcf, the highest end-of-month volume on record.

EIA Requests Comments on Energy and Financial Markets Initiative. In the January 27 Federal Register, EIA requested comments on its Energy and Financial Markets Initiative. EIA announced the initiative in September in response to developments in energy markets. The initiative discusses a number of actions, including the identification of critical information on factors affecting energy prices and analysis through studies of market behavior. The initiative also discusses coordination with other Federal agencies and outreach to solicit feedback on the interrelationship of energy and financial markets. EIA is seeking general comments and recommendations on the initiative and the agency will consider these responses when formulating a plan for filling gaps in key information. EIA requests comments by March 29, 2010, and the Federal Register notice, which includes detailed information, is available here: http://www.eia.doe.gov/oss/FRN-General-60-day-Petro-EnergyMarkets-1-27-2010.pdf






Natural Gas Transportation Update

  • Tennessee Gas Pipeline issued a system-wide imbalance warning for Friday, January 29, asking its customers to match physical flow with scheduled quantities to prevent imbalances that would threaten operational integrity. The warning was issued in anticipation of colder weather across much of its system. Tennessee cited its inability to absorb imbalances caused by underdeliveries by receipt point operators into the system and overtakes from the system by delivery point operators. On Monday, February 1, Tennessee lifted the imbalance warning, but continued to ask customers to match physical flows with scheduled quantities.
  • Southern California Gas Company completed maintenance at its La Goleta storage facility in California on Tuesday, February 2. Initially, the pipeline expected the maintenance to last until February 10 and to cause a loss of 150 million cubic feet per day of injection capacity.
  • Beginning next week, Texas Gas Transmission LLC will perform integrity management inspections on eight segments of its pipeline located north of the Jeffersontown, Kentucky, compressor station. Texas Gas is required to perform the integrity management assessment to maintain the existing waiver which allows them to operate at maximum allowable operating pressure. The assessments are scheduled to be complete by February 27. Based on current system operations and nominations, Texas Gas does not anticipate any impact to their firm shippers downstream of the Jeffersontown compressor station.
  • Sea Robin Pipeline Company announced on Friday, January 29 that it has indefinitely delayed planned maintenance and repairs on the 24-inch diameter Line 706 from Eugene Island 205 to South Marsh Island 33 offshore Louisiana. Nominations will continue to be accepted until further notice at the five platforms that the work was supposed to affect.
  • Gulf South Pipeline Company will be performing pipeline maintenance on Index 293 (Chalmette to Plaquemines) in Louisiana beginning on March 2, 2010. The work is anticipated to last 3 days and Gulf South expects that pipeline pressures will be lower than normal in the area. However, at this point the pipeline does not anticipate any customer interruptions.
  • Natural Gas Pipeline Company of America (NGPL) reported supply reductions in Texas and Oklahoma likely as a result of wellhead freeze-offs, according to Bentek Energy. In a cold weather advisory, NGPL reported that it reduced scheduled quantities to a capacity that reflected physical flow for the Markwest Panola receipt point in Panola County, Texas and the Duke Energy Field Services Chitwood Grady receipt point, in Grady County, Oklahoma.

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