Storage Highlights: Working gas in storage was 3,336 Bcf as of Friday, October 5, 2007, according to EIA estimates. This represents a net increase of 73 Bcf from the previous week. Stocks were 44 Bcf less than last year at this time and 237 Bcf above the 5-year average of 3,099 Bcf. In the East Region, stocks were 91 Bcf above the 5-year average following net injections of 43 Bcf. Stocks in the Producing Region were 118 Bcf above the 5-year average of 870 Bcf after a net injection of 23 Bcf. Stocks in the West Region were 29 Bcf above the 5-year average after a net addition of 7 Bcf. At 3,336 Bcf, total working gas is within the 5-year historical range.
Overview: Thursday, October 11, 2007 (next release 2:00 p.m. on October 18, 2007)
Since Wednesday, October 3, natural gas spot prices decreased at most markets in the Lower 48 States outside the Midcontinent region. Prices at the Henry Hub fell 17 cents per MMBtu, or 2 percent, since Wednesday to $6.79 per MMBtu. At the NYMEX, the futures contract for November delivery at the Henry Hub settled yesterday (October 10) at $7.01 per MMBtu, falling 27 cents or 4 percent since last Wednesday, October 3. Natural gas in storage was 3,336 Bcf as of October 5, which is 7.6 percent above the 5-year average (2002-2006). The spot price for West Texas Intermediate (WTI) crude oil increased $1.33 per barrel on the week (Wednesday-Wednesday) to $81.30 per barrel or $14.02 per MMBtu.
Natural gas spot prices decreased since last Wednesday, October 3, at most market locations outside the Midcontinent region with declines of up to 36 cents per MMBtu. Moderate temperatures, ample supplies of natural gas in storage, and the imminent end of the 2007 hurricane season likely contributed to the declines. However, industrial demand for natural gas, lingering injection demand for natural gas, and incipient heating demand for natural gas in the upper Midwest provided some support for prices, preventing larger declines. Average price declines for regions outside the Rocky Mountain region ranged between 8 and 27 cents per MMBtu, or 1 and 3 percent, since last Wednesday, October 3. In the markets along the Gulf of Mexico, price decreases for the week averaged between 17 and 27 cents per MMBtu, with the Alabama and Mississippi regions posting the largest declines in the Lower 48 States. In the Northeast region, moderating temperatures contributed to price decreases averaging 26 cents per MMBtu. Prices in the Rocky Mountain region posted by far the largest average decrease on a regional basis, falling about $1.07 per MMBtu, with some individual markets in the region posting declines of as much as $2.02 per MMBtu. Continuing transportation constraints in the Rocky Mountain region account for the unusual pricing patterns in the region. In contrast to the overall pattern of declining prices throughout the Lower 48 States, the Midcontinent region posted the only average regional increase since last Wednesday, October 3, as autumnal temperatures moved into region and resulted in heating demand for natural gas.
At the NYMEX, prices for the futures contracts for delivery in each of the next 12 months decreased, with the 12-month futures strip (November 2007 through October 2008) falling about 13 cents per MMBtu, or about 1 percent, since last Wednesday, October 3. The futures contract for November delivery settled yesterday (October 10) at $7.01 per MMBtu, declining 27 cents per MMBtu, or 14 percent, since last Wednesday, October 3. The prices of the NYMEX futures contract for delivery at the Henry Hub during the months of the upcoming 2007-2008 heating season (November 2007 through March 2008) decreased by 19 cents per MMBtu, or 2 percent, on average, since last Wednesday. Overall, the 12-month futures strip (November 2007 through October 2008) traded at a premium of about 98 cents per MMBtu relative to the Henry Hub spot price, averaging $7.77 per MMBtu as of Wednesday, October 10.
Working gas in storage totaled 3,336 Bcf as of Friday, October 5, which is 7.6 percent above the 5-year average inventory level for the report week, according to EIA�s Weekly Natural Gas Storage Report (see Storage Figure). Stocks were 44 Bcf below the 3,380 Bcf in storage at this time last year, but exceeded the 5-year average by 237 Bcf. With more than 3 weeks remaining in the current refill season, net additions to storage need average only 32 Bcf per week to exceed the 3,452 Bcf that was in storage at the beginning of the past winter. On the week, net injections into working gas storage totaled 73 Bcf, exceeding both the 5-year average injection and last year�s net injection of 63 Bcf for the same report week. Temperatures in the Lower 48 States were moderate and somewhat warmer than normal (see Temperature Maps). These moderate temperatures limited natural gas demand, thereby contributing to larger net injections of natural gas into storage.
Other Market Trends:
EIA Releases Winter Natural Gas Outlook: In its latest Short-Term Energy Outlook (STEO), released October 9, the Energy Information Administration (EIA) projects that this winter the average household using natural gas as a heating fuel can expect to pay 10 percent more than last winter with an expected 6-percent increase in price and a 3-percent increase in consumption. Average winter-season weather in the lower 48 States is projected to be 4 percent colder this winter compared with last winter and 2 percent warmer than the 30-year average (1971 to 2000). The annual Henry Hub spot price is expected to average about $7.21 per Mcf in 2007 and $7.86 per Mcf in 2008. Monthly, however the Henry Hub can vary significantly from those averages. The spot price averaged $6.26 per Mcf in September, which was the fourth consecutive decline in the monthly average spot price since May 2007. The decline in the monthly Henry Hub spot price is attributable to a lack of hurricane activity in the Gulf of Mexico this year and historically high storage inventories. Prices are expected to recover as winter approaches and hit a seasonal peak of $8.65 per Mcf in January 2008. Working gas inventories by the beginning of the heating season are projected to exceed 3.4 trillion cubic feet, slightly below the all-time high achieved in 1990. Total natural gas consumption is expected to increase by 4.6 percent in 2007 and 0.4 percent in 2008. The 2007 total dry natural gas production is expected to increase by 1.3 percent in 2007 and by 0.9 in 2008. Total Federal Gulf of Mexico production is expected to decline by 2.6 percent in 2007 but increase by 5.4 percent in 2008 reflecting the contribution from developing deepwater supply infrastructure. Liquefied natural gas (LNG) imports are expected to increase to 840 Bcf in 2007 and 1,010 Bcf in 2008.
Natural Gas Transportation Update:
� Southern Natural Gas Company has declared an operational flow order (OFO), October 9 through 15, because of a shut-in test. The test is located at the Muldon Storage Field in Mississippi. The company will reduce each contract storage service customer�s daily injection and withdrawal quantities on a pro-rata basis. During the OFO period, it may be necessary to change the reduction level.
� Effective October 10, ANR Pipeline Company performed engine repairs at the Patterson compressor station in Louisiana. The repairs will restrict capacity from Patterson to Eunice in the Southeast Gathering Area to 650,000 decatherms (Dth) per day. During this time, the company announced that, based on current nominations, it anticipates that the above reductions may result in curtailment of firm secondary and interruptible transportation services. The company will post updated information as it becomes available.