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Nymex Natural Gas Contract Settlement Price History Monthly Settlement Price document sample
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Natural Gas Outlook
National Association of
State Energy Officials
State Heating Oil and Propane Conference
August 30, 2004
William Trapmann
Energy Information Administration (EIA)
William.Trapmann@eia.doe.gov
www.eia.doe.gov
Presentation Coverage
• Natural Gas Prices
• Production Trends
• Natural Gas Imports
• Storage
• Short-Term Market Outlook
Natural Gas Prices
Natural Gas Prices Generally Track
Oil Prices
NYMEX Natural Gas Futures Near-Month Contract Settlement Price,
West Texas Intermediate Crude Oil Spot Price,
and Henry Hub Natural Gas Spot Price
$10
$9 Henry Hub Spot Price
$8 NYMEX Futures Price
$7 WTI Spot Price
Dollars per Million Btu
$6
$5
$4
$3
NYMEX Natural Gas Settlement Price
WTI Spot Price
$2 Henry Hub Spot Price
$1
$0
6/1/01
7/31/01
9/29/01
1/27/02
3/28/02
5/27/02
7/26/02
9/24/02
1/22/03
3/23/03
5/22/03
7/21/03
9/19/03
1/17/04
3/17/04
5/16/04
7/15/04
11/28/01
11/23/02
11/18/03
Why Are Current Natural Gas
Prices High?
• High Petroleum Prices
• Returns to Drilling
• Lags in Bringing New Production to
Market
• Net Imports Flat
• Demand
Natural Gas
Production Trends
Reserve Additions Exceeded Production
for 8 of the Last 9 Years
160% 152%
Percent of U.S. Gas Production Replaced
140% 131%
118% 118%
120% 108% 108% 107% 104%
100%
88% 85% 83%
80%
60%
40%
20%
0%
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Source: Energy Information Administration, Advance Summary of U.S. Crude Oil, Natural Gas, and Natural Gas Liquids
Reserves 2002 Annual Report
Drilling Increases Are Necessary to Maintain
Production Levels ……
A Growing Percentage of Production Is from Wells
Three Years Old or Less
60
Percent Total Wellhead
50
40
Capacity
–< 1 Year Old
30 –< 2 Years Old
–< 3 Years Old
20
10
0
1993 2003
Sources: EIA.
Gas Rigs Tend To Follow Spot Prices
With A Lag
$14 1200
*
Price (Dollars per MMBtu)
$12
1000
Number of Rigs Drilling
*
Number of Rigs
$10
for Natural Gas 800
$8
600
$6
400
$4
$2 200
Weekly Henry Hub Spot Price
$0 0
1/2/98
7/31/98
2/26/99
9/24/99
4/20/00
5/18/01
6/14/02
7/25/03
2/20/04
11/10/00
11/30/01
12/27/02
Source: Natural Gas Intelligence Weekly Gas Price Index, Baker-Hughes Weekly US Rig Report.
Rig Growth Continues but
Production Remains Flat
U.S. Dry Gas Production & Rotary Rigs
Trillion Cubic Feet Production
1200 20.5
Number Gas Rotary Rigs
Average Annual 20.0
1000 Rig Count 19.5
800 19.0
18.5
600 18.0
17.5
400 Dry Gas 17.0
Production 16.5
200
16.0
0 15.5
1991 1993 1995 1997 1999 2001 2003 2005
Sources: EIA, Baker Hughes Gas Rig Counts, Short-Term Energy Outlook, August 2004
Natural Gas Imports
Pipeline Imports Are Expected to Decline,
While LNG Imports Increase
LNG Imports:
4,500 2003: 507 Bcf Projections
2004: 690 Bcf
4,000
2005: 800 Bcf
3,500
Billion Cubic Feet
3,000
2,500
2,000
1,500
1,000
500
0
1997 1998 1999 2000 2001 2002 2003 2004 2005
Pipeline LNG
Sources: History: EIA; Projections: Short-Term Energy Outlook August, 2004.
LNG Imports at Existing Terminals
900
History Projection
800
Cove Point, MD
700
Billion Cubic Feet
600 Total
Elba Island, GA
500
Lake Charles, LA
400
300 Everett, MA
200
100
0
2000 2001 2002 2003 2004 2005
Source: History, Natural Gas Monthly; 2004-2005: Short-Term Energy Outlook, August 2004.
There Are Numerous Proposals
For New LNG Import Facilities
Projects shown
as of June 2004
Existing Marine Terminal
Proposed Marine Terminal
Sources: Energy Information Administration, U.S. LNG Markets and Uses: June 2004 Update.
Natural Gas Storage
Ja Ja
200
400
600
800
1000
0
200
400
600
800
1000
0
n- n-
01 01
M M
ar ar
-0 -0
1 1
M M
ay ay
- 01 -0
1
Ju Ju
Source: EIA.
l-0 l -0
1 1
Se Se
p- p-
01 01
N No
ov v-
-0 01
1
Ja Ja
n- n-
02 02
M M
ar ar
-0 -0
2 2
M M
ay ay
- -0
02 2
Industrial
Ju Ju
Residential
l-0 l -0
2 2
Se Se
p- p-
02 02
N No
ov v-
-0
2 02
Ja Ja
200
400
600
800
1000
0
200
400
600
800
1000
0
n- n-
01 01
M M
ar ar
-0 -0
1 1
M M
ay ay
- 01 - 01
Ju Ju
l-0 l-0
1 1
Se Se
By Sector (BCF)
p- p-
01 01
N N
ov ov
-0 -0
1 1
Ja Ja
n- n-
02 02
M M
ar ar
-0 -0
2 2
M M
ay ay
- 02 - 02
Ju Ju
Commercial
l-0 l-0
2 2
Se Se
Electric Power
p-
Seasonal Natural Gas Load Patterns
p-
02 02
N N
ov ov
-0 -0
2 2
Underground Natural Gas Storage Facilities
In the Lower 48 States
Natural Gas in Storage Now Exceeds
The 5-Year Average
3,500
3,000
2,500
Billion Cubic Feet
2,000
1,500
1,000
500
0
Nov-02
Nov-03
May-03
May-04
Aug-02
Feb-03
Aug-03
Feb-04
Aug-04
Note: Actual working gas stocks denoted by red line; blue lines show the maximum and minimum
volumes in 1999-2003.
Source: Energy Information Administration, Weekly Natural Gas Storage Report, August 12, 2004.
Natural Gas in Storage Entering Heating Season
Is Expected to Exceed the
Range of the Past Five Years
Projection:
3,196 Bcf
3,500
Working Gas in Storage
3,000
(billion cubic feet)
2,500
2,000 Refill Volumes
1,500
1,000
500
Stocks at end of March
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Storage Stocks as of the End of October
Source: Historical data: EIA; Projected data: Short-Term Energy Outlook August 2004
U.S. Liquefied Natural Gas Facilities
W est R egion
East R egion
Produc ing R egion
Marine Terminal - Import (4) Storage (with liquefaction) (57)
Marine Terminal - Export (1) Storage (without liquefaction) (39)
Other (12)
Notes: Map excludes the import facility in Puerto Rico. “Other” includes: stranded utilities, vehicular fuel
facilities, nitrogen rejection units and other special processing plants.
Source: Energy Information Administration, U.S. LNG Markets and Uses: June 2004 Update, June 2004.
LNG Facilities in the U.S. Northeast
New
WMF
Marine Terminal
Storage (with liquefaction)
Storage (without liquefaction)
Source: Adapted from Energy Information Administration, U.S. LNG Markets and Uses: June 2004 Update,
June 2004.
Short-Term Price
Outlook
Short-Term Outlook for Natural Gas
• Continued price pressure
– No short-term relief expected
• Consumption – flat growth in 2004 and 2005
• Production – marginal growth through 2005
– New well completions are offset by the production
declines for existing wells
• Net imports – slight increase in 2004
and then decrease in 2005
– Increasing LNG imports are offset by decreasing
pipeline imports from Canada
Natural Gas Spot Prices Are Expected to
Average $6.21 This Year
(Base Case and 95% Confidence Interval*)
12.0
Average Spot Price:
10.0
about $6.21 /Mcf in 2004
about $6.60 /Mcf in 2005
Dollars per Thousand Cubic Feet
8.0
6.0
4.0
2.0
Projections
0.0
Jan-00
Jan-05
Jan-01
Jan-99
Jan-02
Jan-03
Jan-04
Sep-05
Sep-04
Sep-99
Sep-00
Sep-01
Sep-02
Sep-03
May-01
May-99
May-00
May-02
May-03
May-04
May-05
Monthly
*The confidence intervals show +/- 2 standard errors based on the properties of the model. The
ranges do not include the effects of major supply disruptions.
Sources: History: EIA; Projections: Short-Term Energy Outlook, August 2004.
U.S. Natural Gas Prices Are Expected to
Trend Upward Through 2005
$16
History Outlook
$14
$12
Residential
Dollars Per Mcf
$10
Commercial
$8
Industrial
$6
Electric Utilities
$4
Wellhead
$2
$0
6
7
8
9
0
1
2
3
4
5
9
9
9
9
0
0
0
0
0
0
n-
n-
n-
n-
n-
n-
n-
n-
n-
n-
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Sources: History: EIA; Projections: Short-Term Energy Outlook, August 2004.
Heating Demand Indicators:
Probability Ranges for U.S. Degree-Days*
This Winter
1200
1000
Heating Degree Days
800
600
Minimum
400
Maximum
Normal
200
Winter 2003-2004
0
Oct Nov Dec Jan Feb Mar Apr
Winter weather was warmer than normal last year.
*Gas-weighted heating degree-days
Sources: History: EIA; Projections: Short-Term Energy Outlook, August 2004.
Volatility Happens
Illustrative Supply and Demand Curves
D4
D3 D1 S
D2
wellhead price
D2
Price
D1D2 D1
0
Supply Capacity Utilization Rate
percent supply utilization rate
Household Winter Heating Fuel Summary
Illustrative Consumer Prices and Expenditures for Heating Fuels During the Winter
Average 2001-2002 2002-2003 2003-2004 2004-2005
1998-2000 Actual Actual Actual Base Forecast
Natural Gas (Midwest)
Consumption (mcf) 88.8 81.3 95.2 89.9 97.8
Avg. Price ($/mcf) 7.61 7.41 8.40 9.69 10.72
Expenditures ($) 676 602 800 871 1049
Heating Oil (Northeast)
Consumption (gals) 673 577 743 728 696
Avg. Price ($/gal) 1.12 1.10 1.34 1.36 1.57
Expenditures ($) 754 635 993 991 1094
Propane (Midwest)
Consumption (gals) 877 803 941 888 966
Avg. Price ($/gal) 1.10 1.11 1.20 1.30 1.41
Expenditures ($) 964 888 1125 1156 1361
Notes: Consumption based on typical per household use for regions noted.
Prices shown are national average delivered-to-household prices.
mcf = thousand cubic feet.
gal = gallon.
Notes: Consumption based on typical per household use for the regions noted.
Sources: History: EIA; Projections: Short-Term Energy Outlook August 2004.
www.eia.doe.gov
