- The direction of spot price movements was mixed this report week (Wednesday-Wednesday, April 22-29). However, changes were relatively small regardless of direction. During the report week, the Henry Hub spot price decreased by $0.05 per million Btu (MMBtu) to $3.43.
- At the New York Mercantile Exchange (NYMEX), futures prices decreased as moderate temperatures in most of the country limited demand and a perception of strong supply continues. The futures contract for May delivery expired on Tuesday, April 28, at a price of $3.321 per MMBtu, which is the lowest monthly closing price for a NYMEX near-month contract for more than 6 years. Meanwhile, the price of the June contract decreased by 24 cents per MMBtu on the week to $3.403.
- As of Friday, April 24, working gas in underground storage was 1,823 billion cubic feet (Bcf), which is 22.5 percent above the 5-year (2004-2008) average.
- The price of West Texas Intermediate (WTI) crude oil increased on the week by $2.78 per barrel to $50.19. The price level for crude oil on an equivalent energy basis equates to approximately $8.65 per MMBtu, which is more than double the price of natural gas in most parts of the country.
Spot natural gas continued to trade at multi-year lows this week, as generally small price changes in markets reflected moderate temperatures and the resulting lower natural gas consumption for most of the country. Decreased space-heating demand in consuming regions and limited demand for air-conditioning along with a steady stream of storage injections continued to contribute to a perception of adequate supplies in the marketplace. While price movements during the week appeared to reflect changes in weather, recent market trends also reflect fundamental conditions in the natural gas marketplace. Most significantly, the economic downturn has resulted in a decline in consumption, particularly in the industrial sector, with many companies announcing layoffs and closures of manufacturing plants around the country (see below regarding the April 2009 Natural Gas Monthly). Although some positive economic signs emerged this week, the Bureau of Economic Analysis reported that its quarterly tally of the real gross domestic product revealed a decline of 6.1 percent in the first quarter of 2009.
On a regional basis, spot markets along the Gulf Coast in Louisiana registered an average price decrease of $0.07 per MMBtu, while in East Texas there was an average increase of 1 cent per MMBtu. The average regional price yesterday was $3.424 in Louisiana and $3.311 in East Texas. The Henry Hub daily price finished the report week at $3.43 per MMBtu, a reduction of 5 cents per MMBtu from the prior week. However, in trading on Monday, April 27, the Henry Hub price fell to $3.19 per MMBtu, the lowest price at this trading location since September 4, 2002.
Prices at the majority of markets west of the Mississippi River increased slightly, although regional prices for the Rockies and Midcontinent continue to be the lowest in the country. Price increases averaged $0.20 per MMBtu in the Rockies, where the advent of warmer weather has increased concerns over an abundance of supplies amid limited options for storage. However, maintenance at a major compressor station by Wyoming Interstate Company temporarily reduced pipeline capacity and likely supported downstream prices in the region late in the report week. At Rockies trading locations, the average price as of April 29 was $2.76 per MMBtu, or 7.6 percent higher than the previous Wednesday. Midcontinent regional pricing is now well-integrated with Rockies price trends because of increased flows between the regions. The price for supplies off Panhandle Eastern Pipeline Company in the Midcontinent finished the week at $2.93 per MMBtu, an increase of 6 cents from the previous Wednesday.
The Northeast region has the highest spot prices in the country at more than $3.80 per MMBtu, despite continued declining prices this week. The average price as of Wednesday was $3.81 per MMBtu, or 6 cents lower than in the prior report week. This decline in prices occurred even as temperatures in the Northeast rose to as much as 20 degrees above normal, likely boosting demand for natural gas as a fuel for higher electricity production to meet air-conditioning needs.
At the NYMEX, the price of the contract for May delivery decreased by more than 20 cents in its last 5 days of trading on the way to the lowest monthly final settlement since August 2002 (and the expiry of the September contract). The May contract expired at a price of $3.321 per MMBtu, which represented a decline in value of more than 40 cents or 11 percent from its opening price of $3.739 per MMBtu as the near-term contract. The decrease in value is attributed chiefly to of the impact of the economy and relatively strong supplies as indicated by higher-than-average levels of natural gas in underground storage.
At the end of trading yesterday (April 29), the price of the June contract was $3.403 per MMBtu, which was about 24 cents lower on the week. While the price of contracts through the summer experienced similar decreases on the week, prices for next winter declined by slightly more at close to 28 cents per MMBtu. However, because of a generally higher price level for next winter, the increases were lower on a percentage-basis at about 5 percent. The 12-month strip, which is the average for natural gas futures contracts over the next year, was priced at $4.64 per MMBtu, a decrease of about $0.25, or 5.1 percent, since last Wednesday.
Working gas in storage totaled 1,823 Bcf as of Friday, April 24, 2009, according to EIAë© Weekly Natural Gas Storage Report (see Storage Figure). The implied net injection during the report week was 82 Bcf, bringing the current level of supplies in underground storage to 22.5 percent more than the 5-year average. Net injections totaled 69 Bcf during the comparable week on average over the past 5 years, while the net injection totaled 77 Bcf for the comparable week last year.
The net injection of 82 Bcf is the largest net injection to date this year. Reduced demand as a result of the current economic downturn and robust volumes from domestic production continue to be important factors in storage activity. Additionally, in the past several weeks, shipments of liquefied natural gas (LNG) have increased considerably. Send-out from U.S. LNG terminals is approaching 1.5 Bcf per day, compared with less than 1 Bcf per day earlier this winter and at this time last year.
With the moderate temperatures of springtime during the report week, there was likely little weather-related demand (neither for space-heating nor for power-generators for air-conditioning needs). As a result, industry was able to continue the process of building storage inventories in anticipation of higher demand levels later in the year. In fact, this weekë© above-average injection came during a week when temperatures across the country were quite moderate, averaging 56.3 degrees Fahrenheit compared with a normal average of 54.6 degrees. As measured by National Weather Service, heating degree-days (a measure of energy requirements relating to cold weather) totaled 12 percent lower than normal, and cooling degrees-days (a measure of energy requirements relating to hot weather) were 25 percent above normal for the week ending April 24 (see Temperature Maps and Data).
Natural Gas Transportation Update
- Southern Natural Gas Company announced last Friday (April 24) that it was investigating a leak on the West Delta 105 18-inch line offshore Louisiana and declared a force majeure. As a result of the suspected leak, seven receipt points in the area flowing a total of 42 million cubic feet (MMcf) per day were shut in for the day. However, flows at the receipt points resumed the next day once divers concluded there was no leak on the line.
- Panhandle Eastern Pipeline reported last week that it is undertaking a pipe replacement on the Houstonia 100 Line between gate valves 104 and 112W in Missouri. The pipe replacement began on April 29 and is expected to last 14 days. During this period, capacity through the Houstonia line will be limited to 1,250 MMcf per day. However, the company does not expect that the capacity curtailment will have any impact on firm transportation service.
- Maritimes and Northeastern Pipeline LLC announced that the Sable Offshore Energy Project (offshore Canada) will undergo a planned outage lasting about 20 days in August 2009. During this outage, no natural gas supply will be available from Sable Island to flow on the Canadian portion of the Maritimes pipeline system.
- ANR Pipeline Company continues to perform unplanned engine maintenance at its Defiance compressor station in Ohio on the pipelineë© Northern Fuel Segment (ML-7). The maintenance, which is expected to be complete on May 1, reduced the capacity at the compressor station by 35 MMcf per day. Based on ANRë© nominations as of the time of the announcement, the pipeline expected that interruptible and secondary firm service customers may experience curtailments.