Peak shut-in natural gas production in the Federal Offshore Gulf of Mexico (GOM) during Hurricane Isaac was about 3.2 billion cubic feet (Bcf) per day. Isaac was sufficiently powerful to force evacuation of 85% of production platforms and shut-in 73% of GOM natural gas production (at peak). However, Isaac’s impact on overall U.S. natural gas production was relatively modest, representing only 4.7% of average daily natural gas production in 2012.
While the shut-ins associated with Isaac represented a significant portion of GOM production, the impact on the domestic market was less severe than it might have been in the past because GOM production represents a smaller portion of total U.S. production today than 5 to 10 years ago due to the dual effect of waning GOM production and increasing onshore production. The graph to the left shows Isaac’s peak shut-in volume as a share of total average daily U.S. natural gas production from 2000 to present. The declining share after 2006 underscores the diminishing contribution of the GOM to overall U.S. natural gas production.
Natural gas prices rose across most spot market locations, most notably at Algonquin Citygate. Algonquin Citygate, which delivers natural gas to Boston, saw price gains well above other trading points due to unseasonably warm weather. Algonquin began the week at $2.99 per MMBtu, and ended at $3.55 per MMBtu, a gain of 56 cents, or 18.7 percent. The Henry Hub showed comparatively modest gains, more in line with other trading points. The Henry Hub price rose from $2.63 per MMBtu last Wednesday to $2.87 yesterday, an increase of 24 cents, or 9.1 percent. Although many Hurricane Isaac-related production outages in the Gulf of Mexico were restored this week, both Texas and the Southeast experienced above-normal temperatures, offsetting restored Gulf production with additional demand for natural gas for power generation.
The NYMEX October 2012 futures contract increased from $2.685 per MMBtu last Wednesday to $2.795 per MMBtu yesterday, an increase of 11 cents, or 4.1 percent. The October settlement price rose week-on-week after falling through much of September. The 12-Month Strip (average of October 2012 to September 2013 contracts) similarly gained 13 cents, starting at $3.163 per MMBtu last Wednesday and settling at $3.290 per MMBtu yesterday. Both the NYMEX futures price and the 12-Month Strip fell a few cents yesterday, a phenomenon that did not occur in spot markets.