Overview (For the Week Ending Wednesday, August 12, 2009)

  • Reversing gains from the previous week, natural gas prices posted declines in both the spot and futures markets, with decreases in the spot markets of up to 48 cents per million Btu (MMBtu). The Henry Hub spot price fell 25 cents, or 7 percent, closing at $3.36 per MMBtu on Wednesday, August 12.
  • The natural gas futures contract for September 2009 at the New York Mercantile Exchange (NYMEX) fell 56 cents, or 14 percent, on the week, closing at $3.479 on Wednesday. During its tenure as the near-month contract, the price of the September 2009 contract peaked at $4.042 on August 5.
  • Natural gas in storage increased by 63 billion cubic feet (Bcf) to 3,152 Bcf for the week ending August 7, 2009, according to EIA Weekly Natural Gas Storage Report.      
  • As of August 7, the number of natural gas rotary rigs was 681, an increase of 4 from the previous week, according to Baker Hughes Incorporated data. Following several months of decline, the number of rigs has oscillated in the last several weeks, which could indicate that the rig count has stopped declining. However, natural gas rigs are currently 57 percent lower than year-ago levels, when they were near record highs.
  • Mirroring natural gas prices, the price of the West Texas Intermediate crude oil contract fell by $1.89, or about 3 percent, closing at $70.08 per barrel, or $12.08 per MMBtu, yesterday.
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     Prices

    Across all U.S. market locations, price decreases averaged 36 cents, as all market locations but one posted declines. The Henry Hub price fell 25 cents, closing at $3.36 per MMBtu on Wednesday. All trading locations posted declines on the week, except the Florida Gas Transmission Citygate trading point, which posted a net change of zero. Florida is the only market location with a price above $4 per MMBtu, ending the week at $4.82 per MMBtu. Prices in most trading locations closed in the $3 range, with exceptions at trading points in the Rocky Mountains. Questar and Kern River posted decreases of 48 cents, closing at $2.87 per MMBtu. Gas prices at these two locations are currently the lowest of the 78 trading points analyzed. Weather in the Rocky Mountains and Midcontinent region was cooler than normal this week, likely contributing to price weakness.

     Spot prices spiked at most locations on Thursday, August 6, with the Henry Hub price rising 17 cents. Prices peaked on Thursday, August 6, continuing the recent pattern of increasing prices that began during the previous report week, as a result of warm weather and pipeline maintenance in some areas, However, prices fell in subsequent trading days, despite continued maintenance in some areas such as on Enterprise Product Partners High Island 264 platform in the Gulf of Mexico. Areas in Texas and around the Gulf of Mexico generally posted declines of more than 30 cents, despite mean temperatures in the upper 80s in most of the State during the reference week. Outside of the South, temperatures were generally somewhat cooler than normal, contributing to slightly higher price declines compared with areas experiencing hotter temperatures.

    Natural gas prices have dropped drastically since the beginning of 2009 and compared with year-ago levels. At $3.36 per MMBtu, the Henry Hub price is 38 percent lower than its level of $5.41 per MMBtu at the beginning of the year, and 59 percent lower than its level of $8.23 per MMBtu recorded on August 12, 2008. Robust natural gas supplies and weak demand resulting from the economic downturn have contributed to the fall in prices.

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    The price of the natural gas futures contract for September delivery fell on the week, from $4.042 per MMBtu to $3.479 per MMBtu. This price decrease represents about a 56 cent decline on the week. Prices fell during each day of the report week, dropping by close to 30 cents on Thursday. Futures prices are likely falling as a result of perceived robustness in natural gas supplies, with storage likely to reach a record high at the end of the heating season. Since the beginning of the year, the September 2009 contract has lost almost 59 percent of its value, falling from $8.466 per MMBtu on January 2. The 12-month strip also declined on the week, dropping 35 cents from $5.603 to $5.250. The largest declines occurred for the September and October contracts, and each month declined less than the contract for the previous month. Mirroring the spot market, natural gas futures also reversed gains made in the previous week.

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