* Spot gas at most market locations (outside the Rocky Mountain Region) traded above $10 per million Btu (MMBtu) this report week (Wednesday-Wednesday), with many points registering prices in excess of $12 per MMBtu.
* At the New York Mercantile Exchange (NYMEX), the price of the futures contract for July delivery at the Henry Hub moved higher by 38 cents per MMBtu compared with its settlement price a week ago, ending yesterday (June 4) at $12.379 MMBtu.
* Natural gas in storage was 1,806 billion cubic feet (Bcf) as of May 30, which is 0.1 percent below the 5-year average (2003-2007).
* The spot price for West Texas Intermediate (WTI) crude oil decreased a sizeable $8.70 per barrel on the week to $122.30 per barrel or $21.09 per MMBtu. Still, the crude oil price remains more than $20 per barrel higher than the price in early April.
The summer-like temperatures across much of the Lower 48 States and concerns over natural gas supply boosted prices in most market locations in the Lower 48 States. As of yesterday, prices at most trading locations had increased on the week by 50 cents per MMBtu. The Henry Hub spot price increased 57 cents to $12.17 per MMBtu. The average regional spot price in Louisiana was also $12.17 per MMBtu, about 71 cents higher than the previous Wednesday’s price. Other regions along the Gulf Coast also registered sizeable increases, with the average price in East Texas reaching $11.99 per MMBtu (an increase of 59 cents since last Wednesday). Similarly, the average price in Alabama/Mississippi was $12.23 per MMBtu yesterday, about 90 cents higher than the previous Wednesday’s price. The average price in the Northeast remained the highest at $12.93 per MMBtu. Seven trading locations in the Northeast registered prices exceeding $13 per MMBtu, including the price ($13.54 per MMBtu) for the Dracut, Massachusetts, location, which takes natural gas deliveries into high consumption areas of New England.
Despite the melting snow across the Pacific Northwest and the increase in hydroelectric power generation, natural gas prices in California rose on the week. The price at the Pacific Gas and Electric citygate increased 22 cents on the week, trading yesterday at $11.38 per MMBtu. On the regional level, the average price in California increased 43 cents per MMBtu, ending the report week at $10.78 per MMBtu.
The restoration of natural gas production at Independence Hub supported price decreases during yesterday’s trading. Enterprise Products Partners reported yesterday that the repairs to the flex joint on the Independence Trail pipeline were complete (see Other Market Trends). In addition, Bentek Energy LLC estimated that nominations into Tennessee Gas Pipeline for today (Thursday, June 5) reached 240 million cubic feet (MMcf) per day, with the expectation that the volume would increase by the end of the day. During yesterday’s trading, spot prices at virtually all market locations decreased between 4 and 77 cents. Furthermore, the cooler weather that blanketed Colorado, Wyoming, and Utah on Tuesday and Wednesday, limiting natural gas demand, resulted in a 50-cent average decrease in the Rockies.
At the NYMEX, the price of the futures contract for July delivery at the Henry Hub increased to $12.379 per MMBtu yesterday, gaining about 38 cents or 3.2 percent on the week. The near-month futures price continued the upward trend observed since the beginning of the year, reaching the highest price since December 2005. The July 2008 contract traded yesterday $4.188 per MMBtu higher than the July 2007 contract at the same time last year. Similar to the July 2008 contract, the August 2008 futures contract increased 36 cents to $12.442 per MMBtu.
Natural gas futures contracts for delivery over the next 12 months increased by an average of 19 cents, with the 12-month strip ending trading yesterday at $12.212 per MMBtu. As of yesterday, the refill season contracts for July to October traded at an average of $12.432 per MMBtu, while heating season contracts (November 2008-March 2009) traded at $12.961. The January 2009 and February 2009 contracts exceeded $13 per MMBtu on Tuesday (June 3) and remained there yesterday as well. This was the first time a heating season contract crossed the $13-per MMBtu threshold since December 2005. The January and February 2009 contracts settled yesterday at $13.172 and $13.122 per MMBtu, respectively.
Forecasts of hot and humid weather in key consuming markets likely pushed futures prices higher on the week. Despite the resumption of production at Independence Hub yesterday, the futures prices for all contracts in the 12-month strip increased in yesterday’s trading by 8 cents with the exception of the May and June 2009 contracts, which recorded only slight decreases of about 1 cent. Possible supply disruption this summer likely was also a concern, as the most recent hurricane outlook from Colorado State University indicates above-average storm activity in the Atlantic basin (see Other Market Trends).
Working gas in underground storage increased to 1,806 Bcf as of May 30, representing a net weekly increase of 105 Bcf, according to EIA’s Weekly Natural Gas Storage Report (see Storage Figure). This week’s net injection is 7 percent higher than the 5-year average injection of 98 Bcf. However, it is 5 percent lower than last year’s net injection of 110 Bcf for the week and marks the fifth week in a row that injections fell short of last year’s rate. Furthermore, net additions to storage were below last year’s in 7 out of 9 weeks since the beginning of the non-heating season (April through October 2008), and the current storage volume fell to 326 Bcf (15.3 percent) below last year’s level.
The sizeable injection this week corresponds to the close-to-normal temperatures that prevailed during the week ended May 29. Overall, moderate temperatures prevailed in the Lower 48 States during the report week, contributing to the robust net additions to storage. As measured by heating degree-days (HDDs) and cooling degree-days (CDDs) published by the National Weather Service, temperatures deviated from normal temperatures by only about 2 degrees and were not significant enough to cause much weather-related demand.(Temperature Maps and Data)
Other Market Trends
FERC Authorizes Rockies Express Pipeline to Begin its REX-East Construction. On May 30, 2008, the Federal Energy Regulatory Commission (FERC) authorized the Rockies Express Pipeline LLC (REX) to extend its interstate pipeline to Ohio. REX-East will be able to transport more than 1.8 billion cubic feet (Bcf) per day of natural gas to markets east of the Rockies, specifically in the Midwest and eastern areas of the United States. The new 42-inch-diameter pipeline would traverse about 639 miles from Audrain County, Missouri, through Illinois and Indiana, terminating at an interconnection with three pipelines at the Clarington Hub in Monroe County, Ohio. The three pipelines are Dominion Transmission Inc., Dominion East Ohio, and Texas Eastern Transmission LP. The project would also include the construction and operation of other related facilities, including two new compressor stations on Rockies Express’ existing facilities in Carbon County, Wyoming, and Phelps County, Nebraska. REX-East is the third leg of the project. The first leg, REX-Entrega, went into service on February 14, 2007, and runs 327 miles from the Meeker Hub in Rio Blanco County, Colorado, to the Cheyenne Hub in Weld County, Colorado. The second leg (REX-West) was authorized on May 16, and extends about 717 miles from Weld County, Colorado, to Audrain County, Missouri. The last leg, which is the REX-East, is expected to be in service around November 2009.
Active 2008 Hurricane Season Predicted in the Atlantic Basin. Colorado State University (CSU) released a new 2008 hurricane season outlook on Tuesday, June 3, affirming its April forecast that this year’s hurricane season will be more active than the average between 1950 and 2000. CSU predicts that there will be 8 hurricanes in 2008, 4 of which will be category 3 or higher. Furthermore, the forecast calls for 80 named-storm days, 40 hurricane days, and 9 intense hurricane days (the average is 5). The forecast is based on a new extended-range that uses 58 years of past data. The hurricane season began on June 1 and will last until November 31. The first storm of the season, Tropical Storm Arthur which formed on May 31, was included in the latest forecast.
Natural Gas Transportation Update
* Enterprise Products Partners L.P. announced that it has completed repairs to the flex joint assembly of the Independence Trail pipeline, allowing operations at the hub to resume. The flex joint was the source of the leak that occurred on April 8, which caused production to be shut-in. Initial tests following the repair indicate that the flex joint is operating normally. Located in about 85 feet of water, the flex joint is designed to allow the pipeline to withstand movements of the Independence Hub platform. Volumes from the hub are currently flowing at reduced rates while final testing is completed. The hub is expected to be able to accommodate full volumes during the first half of June.
* Questar Pipeline Company has rescheduled the maintenance at its Price Dew Point processing in Carbon County, Utah, that was originally scheduled from gas day Monday, June 30, through gas day Friday, July 11, to gas days Tuesday, July 8, through Friday, July 18,. To facilitate the work, available capacity at the Blind Canyon scheduling point in Duchesne County, Utah, will be reduced to 200,000 Dth per day and the Main Line 80 scheduling point in Utah will be reduced to 210,000 Dth per day for the duration of the work. Based on current nominations, this represents a 30-percent reduction of nominations at the Blind Canyon scheduling point and a 100-percent reduction of interruptible nominations. Additionally, during gas days Tuesday, July 8, and Wednesday, July 9, Questar will also complete required annual maintenance and Department of Transportation mandated testing at the Thistle compressor station in Utah County, Utah.
* Gulf South Pipeline Company announced that scheduled pipeline maintenance on the Carthage Junction compressor station located in eastern Texas will take place between June 17 and 19, 2008. As a result of the maintenance activity, available receipt capacity in Area 8 to Expansion Area 16 located in North East, Texas will be reduced to zero for the duration of the maintenance. Gulf South also announced that it has received authorization to begin service at its Tallulah compressor station in Madison Parish, Louisiana.