Sam Fletcher
Senior Writer
HOUSTON, Sept. 15 -- The natural gas futures price fell below $5/MMbtu Sept. 14 to the lowest level in 2 years in New York market after the US Energy Information Administration reported a large leap in US gas storage.
EIA reported the injection of 108 bcf of gas into US underground storage during the week ended Sept. 8 (OGJ Online, Sept. 14, 2006). That was the first triple-digit increase since June 3, 2005, up substantially from 71 bcf the previous week and 89 bcf during the same period a year ago. Gas injections normally increase during the week of the US Labor Day holiday—this year on Sept. 4—when power plants' demand for gas is curtailed because of closed offices and factories.
US gas storage now exceeds 3 tcf, up by 339 bcf from the same period last year and 341 bcf above the 5-year average. This is the earliest time by 2 weeks that US gas storage has passed the 3 tcf mark, said analysts at Enerfax Daily. "Mild weather since the start of August has decreased power plant demand for natural gas and let storage caverns fill quickly," they said.
"All summer, our analysis showed that the supply-demand equation was about 2 bcfd tighter (bullish). In the last 2 weeks, we've gone from 2 bcfd tighter to 3.5 bcfd looser," said analysts in the Houston office of Raymond James & Associates Inc. "It now appears as if we are going to test full storage, which means more volatility and the chance of gas-on-gas competition likely. This will lower prices in certain regions until producers start shutting in when no more injections in the system are possible."
Wellhead prices for gas in the Rockies were reported down 35% to $3/MMbtu earlier this week.
Raymond James analysts said, "Historically, we have never seen higher than 3.4 tcf in storage, and we estimate that the most that can go in is approximately 3.5 tcf. If storage continues this build and we start the year with unprecedented levels, this may have a meaningful impact on 'resetting' forces in 2007."
The October natural gas contract fell 55.7¢ to $4.89/MMbtu Sept. 14 on the New York Mercantile Exchange.
Other energy prices
Benchmark US light, sweet crudes for October delivery dropped 75¢ to $63.22/bbl on NYMEX, wiping out the previous day's small increase that had capped a downward price spiral over the eight previous trading sessions. The November contract lost 87¢ to $64.11/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down 75¢ to $63.23/bbl. The October heating oil contract declined by 3.18¢ to $1.71/gal on NYMEX. Unleaded gasoline for the same month dipped by 0.09¢, yet remained virtually unchanged at $1.55/gal.
In London, the October IPE contract for North Sea Brent crude lost 75¢ to $62.24/bbl. Gas oil for the same month retreated by $4.50 to $551.75/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes gained 27¢ to $59.22/bbl on Sept. 14.
Contact Sam Fletcher at [email protected].
