Since Wednesday, April 9, natural gas spot prices increased at virtually all market locations in the Lower 48 States. Currently, spot prices exceed the average spot prices of the 2007-2008 heating season by about 25 percent.
At the New York Mercantile Exchange (NYMEX), the futures contract for May delivery at the Henry Hub settled yesterday (April 16) at $10.433 per million Btu (MMBtu), posting a 38-cent increase and reaching the highest price for a near-month contract since January 2006.
Natural gas in storage was 1,261 billion cubic feet (Bcf) as of April 11, which is 0.2 percent below the 5-year average (2003-2007).
The spot price for West Texas Intermediate (WTI) crude oil increased $3.91 per barrel on the week to $114.80 per barrel or $19.79 per MMBtu.
The natural gas market has entered the shoulder season characterized by softer demand resulting from more moderate temperatures and the lack of temperature extremes across much of the country. However, the price patterns outside of the Rockies and Midcontinent failed to respond to the decrease in demand. With the exception of the Rocky Mountain and Midcontinent regions, where average prices were virtually unchanged, average prices increased in all other trading regions in the Lower 48 States. Prices in California, for example, registered average price increases of 23 cents on the week in response to the chilly temperatures that generated some heating demand, particularly on Monday and Tuesday of this week.
Prices in the producing region along the Gulf Coast increased on the week, rising between 6 and 25 cents per MMBtu. The Henry Hub spot price rose 22 cents per MMBtu to an average of $10.11 per MMBtu in yesterdays trading. The Henry Hub spot price exceeded $10 per MMBtu in each trading day since last Thursday (April 10), when it reached $10.18 per MMBtu, the highest price at this location since December 27, 2005. Temperatures this week also created some cooling demand, most notably in the Southwest. Prices in Arizona/Nevada, where temperatures in some areas reached 90 degrees this week, increased 26 cents or 2.7 percent, registering the highest weekly average increase in the Lower 48.
The current price level is unusual for this time of year, as the shoulder season prices are generally significantly lower than those during the heating season months. Natural gas spot prices exceeded $10 per MMBtu at 37 trading locations yesterday. The unweighted average natural gas spot price in the Lower 48 States yesterday was $9.87 per MMBtu. Average spot prices in the Lower 48 States during the 2007-2008 heating season averaged $7.93 per MMBtu, which was about 20 percent lower than yesterdays average price.
Supply constraints in the natural gas market and high crude oil prices most likely led to higher prices on both the spot and futures markets. Production at the deepwater Gulf of Mexico Independence Hub natural gas platform continues to be shut-in, which results in a natural gas supply loss of more than 850 million cubic feet per day. While Enterprise Products Partners LP, the owner of the production platform and the Independence Trail pipeline, initially estimated that repairs would take between 1 and 4 weeks, there have been no additional updates as to when supply could come back online. Furthermore, liquefied natural gas (LNG) imports continue to be significantly below last years volumes, with an average of less than 1 Bcf per day imported during the first 2 weeks of April. In April 2007, the United States imported approximately 3.2 Bcf per day of LNG. Yesterdays price of WTI crude oil was almost double the natural gas spot price at the Henry Hub.
Natural gas futures prices for May delivery rose on the week, posting a 38-cent per MMBtu increase. The price of the May futures contract settled yesterday at $10.433 per MMBtu, increasing in four trading sessions during the week. Yesterdays price of the near-month contract was the highest in more than 2 years. In fact, the price of the May contract remained above $10 per MMBtu the entire week, with the exception of the settlement price of $9.901 per MMBtu on April 11. This week marks the fourth consecutive week that the near-month price has registered a net increase.
Futures prices for natural gas delivery through April 2009 posted similar increases, with the 12-month strip rising 40 cents. Prices for the 12-month futures strip (May 2008 through April 2009) averaged $10.841 per MMBtu as of Wednesday, April 16, increasing about 4 percent. The April 2009 contract was the only contract that settled below $10 per MMBtu in yesterdays session, while the 2008-2009 heating season contracts averaged $11.367 per MMBtu.
Working gas in underground storage was 1,261 Bcf as of April 11, which differs from the 5-year average inventory level for the report week by only 3 Bcf, according to EIAs Weekly Natural Gas Storage Report (see Storage Figure). This weeks net injection, which was the first injection of the year, was 27 Bcf and it sharply contrasts with both the 5-year average net injection of 7 Bcf and last years net withdrawal of 26 Bcf. Last years net withdrawal was the second-highest withdrawal recorded in April in EIAs 14-year database of weekly storage activity. The net injection for the report week thus reduced the differences between current storage inventories and both last years level and the 5-year (2003-2007) average.
This report weeks implied net injection came during a week in which the weather for the country as a whole was colder than normal, with heating degree-days (HDDs) about 12 percent higher than normal. However, temperatures in the Lower 48 States were about 26 percent warmer than last year for the same week (see Temperature Maps and Data), leading to the relative differential from last years withdrawal of 26 Bcf. The Middle Atlantic and South Atlantic were the only Census Divisions that recorded colder-than-normal temperatures, with HDDs numbering 6.6 and 14.1 percent higher than normal.
Other Market Trends:
New LNG Import Terminals in North America Receive First Cargoes. U.S. capacity to receive imports of liquefied natural gas (LNG) increased considerably this week as two new marine terminals received first cargoes to commence their commissioning processes. Sabine Pass LNG, L.P., on Friday, April 12, took delivery of the LNG tanker The Celestine River at its new terminal located in Cameron Parish, Louisiana, becoming the first onshore LNG terminal to open in the United States in more than 25 years. The Sabine Pass LNG terminal, which is owned by Cheniere Energy Inc., has two berthing docks, each capable of handling ships with capacity to transport 265,000 cubic meters of LNG, which is equivalent to almost 6 billion cubic feet (Bcf) of natural gas in gaseous form. In its first operating phase, Sabine Pass LNG has the capacity to vaporize 2.6 Bcf per day, with Total, S.A.; Chevron; and affiliate Cheniere Marketing having purchased capacity rights. On Tuesday, April 15, Freeport LNG L.P., which broke ground on its facility on Quintana Island, Texas, in 2005, received the LNG tanker Excelsior. Freeport LNG has one berthing dock that also can receive tankers with capacity to transport about 6 Bcf. In its initial operations, the facility has a capacity to vaporize 1.5 Bcf per day. This send-out capacity has been purchased by ConocoPhillips Company and Dow Chemical Company.
Excelerate Energy LLC expects its first LNG shipment to the Northeast Gateway terminal offshore Massachusetts in May. Northeast Gateway, located about 18 miles east of Boston, is similar to the existing offshore Gulf of Mexico facility Gulf Gateway, which opened in 2005 and also is owned by Excelerate. The two facilities do not have regasification equipment on site, and as a result require specialized tankers for delivery and regasification of the LNG. Nonetheless, they both can deliver approximately 0.5 Bcf per day into adjoining pipeline infrastructure when supplies are available. A fourth LNG facility, Cameron LNG, located on Lake Charles, Louisiana, began construction in late 2005 and expects to begin commercial operations by late 2008. The terminals owner, Sempra LNG, has reached agreements to provide Tractebel LNG North America up to one-third of the capacity, or about 0.5 Bcf per day, for 20 years. Additionally, Italys ENI signed a preliminary agreement with Sempra to take 0.6 Bcf per day of capacity for 20 years.
With both Freeport LNG and Sabine Pass LNG now operational, U.S. capacity to receive LNG imports has increased from approximately 5 Bcf per day at the end of 2007 to about 9.1 Bcf per day. By the end of 2008, total U.S. capacity to receive LNG imports is expected to reach more than 11 Bcf per day. In addition, LNG facilities in Canada and Mexico are nearing completion that will boost total North American LNG import capacity to nearly 14 Bcf per day. Sempra LNG is set to begin the commissioning of its Costa Azul LNG facility in Baja California perhaps as soon as next week with one cargo reportedly on standby offshore the sites location waiting to discharge. Costa Azul LNG will have the capacity to deliver 1.5 Bcf per day into the pipeline grid, much of which is expected to be exported to U.S. markets. Lastly, Canaport LNG L.P., owned by Irving Oil Limited and Repsol YPF, anticipates completing construction by the end of 2008. This facility, located in Saint John, New Brunswick, Canada, will have a send-out capacity of 1.2 Bcf per day, much of which is destined for markets in the northeastern United States.
Natural Gas Transportation Update:
On April 10, Florida Gas Transmission Company issued an Overage Alert Day (OAD) set at 25 percent tolerance, because of high temperatures and low linepack. Previously scheduled market-area Interruptible Transportation Service was not interrupted below the elapsed prorated scheduled quantity. The OAD was in effect between April 10 and 13.
On April 15, Gulf South Pipeline Company announced that it has completed the maintenance on Unit Number 3 at the Carthage Number 2 Compressor Station located in Panola County, Texas. During the maintenance, capacity through the Carthage 2 Station may have been reduced by as much as 50,000 decatherms (Dth).
Questar Pipeline Company announced that a withdrawal test was completed on April 15 at the Clay Basin storage facility in Utah. The facility returned to normal operations on April 16. Capacities are as follows: withdrawal is 460,000 Dth per day (Dth/d); injection is 325,000 Dth/d; and park and loan is 25,000 Dth/d.