Natural Gas

Overview:

Since Wednesday, October 30, natural gas spot prices have decreased at most locations in the Lower 48 States, falling between 29 and 77 cents per MMBtu. For the week (Wednesday-Wednesday), prices at the Henry Hub decreased 40 cents or roughly 9 percent to $3.93 per MMBtu. The price of the NYMEX futures contract for December delivery at the Henry Hub has decreased nearly 54 cents since last Wednesday to settle at $3.854 per MMBtu yesterday (November 6). Natural gas in storage decreased to 3,145 Bcf, but exceeds the 5-year average by almost 5 percent. The spot price for West Texas Intermediate (WTI) crude oil declined $1.13 per barrel or about 4 percent since last Wednesday to trade at $25.72 per barrel or $4.434 per MMBtu.

 

 

 

Prices:

 

Spot prices generally decreased over the past 7 days, keyed by significant price drops last Thursday, Friday, and Monday as moderating temperatures mitigated demand for natural gas. The steepest declines since last Wednesday occurred at selected points in the Midcontinent and Northeast regions as prices fell between 60 and 77 cents per MMBtu. Prices were at relatively high levels on Wednesday, October 30, driven principally by an early blast of cold weather across most parts of the country. However, prices tumbled on Friday, November 1, with declines of 25 to 44 cents per MMBtu. Contributing factors to the sharp drop in price likely included the Weekly Natural Gas Storage Report released on Thursday, October 31, which reported larger-than-expected additions to storage, in addition to warmer temperatures and lessened demand over the weekend. The overall pattern of declining prices was halted on Tuesday, November 5 and Wednesday, November 6 with slight gains of less than nickel at most markets.

 

At the NYMEX, the price of the futures contract for December delivery at the Henry Hub has decreased nearly 54 cents since Wednesday, October 30, to settle at $3.854 per MMBtu on Wednesday, November 6. Prices of the futures contracts for delivery during the remaining months in 2002 and through the heating season have decreased by roughly 32 to 49 cents per MMBtu since October 30, with the larger increases occurring for the more immediate months' contracts. After falling more than 12 cents below the Henry Hub spot price last Thursday, prices of the contracts for the winter months of January and February climbed above the current Henry Hub spot price as the week progressed. This price differential could provide some incentive for additions of natural gas to storage.

 

 

Spot Prices ($ per MMBtu)	Thur.	Fri.	Mon.	Tues.	Wed.
	31-Oct	1-Nov	4-Nov	5-Nov	6-Nov
Henry Hub	4.38	4.06	3.94	3.90	3.93
New York	4.98	4.52	4.34	4.42	4.44
Chicago	4.41	4.08	3.91	3.92	3.92
Cal. Comp. Avg,*	4.33	4.07	3.93	3.88	3.93
Futures ($/MMBtu)
Dec delivery	4.156	4.06	3.863	3.883	3.854
Jan delivery	4.256	4.165	3.983	3.993	3.971
*Avg. of NGI's reported avg. prices for: Malin, PG&E citygate,
and Southern California Border Avg.
Source: NGI's Daily Gas Price Index (http://intelligencepress.com).

 

Storage:

Working gas in storage was 3,145 Bcf for the week ended Friday, November 1, 2002, according to the EIA Weekly Natural Gas Storage Report. This is the first time since the week ended June 1, 2001, that current stocks have fallen below the level recorded during the same report week of the previous year. (See Storage Figure) Nevertheless, natural gas in storage is almost 5 percent greater than the 5-year average of 3,007 Bcf for the report week. Implied net withdrawals of natural gas from working gas storage were 27 billion cubic feet (Bcf), which marks the first net withdrawal of the 2002-2003 heating season and only the second time in the past 8 years that a net withdrawal occurred during the report week. The withdrawals from storage were driven by the early arrival of cold temperatures across the Lower 48 States. On average, gas-weighted heating degree days were 37 percent above normal for the week ended November 2, 2002, and 59 percent above the level last year for the same week. (See Temperature Map) (See Deviation Map)  

 

 

All Volumes in Bcf	Current Stocks 11/01/02	Estimated Prior 5-Year (1997-2001) Average	Percent Difference from 5 Year Average	Implied Net Change from Last Week	One-Week Prior Stocks 10/25/02
East Region	1,854	1,843	0.6%	-13	1,867
West Region	411	363	13.2%	-5	416
Producing Region	880	802	9.7%	-9	889
Total Lower 48	3,145	3,007	4.6%	-27	3,172
Source: Energy Information Administration: Form EIA-912, "Weekly Underground Natural Gas Storage Report," and the Historical Weekly Storage Estimates Database. Row and column sums may not equal totals due to independent rounding.

 

Other Market Trends:

EIA Releases New Report on the U.S. LNG Market: The Energy Information Administration (EIA) has posted a feature article on its web site on the role of liquefied natural gas (LNG) in the natural gas industry titled U.S. LNG Markets and Uses. The article examines different aspects of LNG operations, paying particular attention to marine terminals, peak-shaving storage facilities, and facilities serving niche markets such as LNG as a vehicular fuel. LNG, which is natural gas that has been cooled to about minus 260 degrees Fahrenheit for shipment and/or storage as liquid, is an important source of supply in meeting the peak-day demands of local utilities, particularly in the Northeast. The report highlights the role of these LNG storage facilities, as well as proposed expansion plans at existing U.S. LNG import terminals and proposals for new import facilities.

 

EIA Issues Information of Particular Interest to Residential Natural Gas Customers: On Friday, November 1, EIA posted an information product on its web site titled: Residential Natural Gas Prices: Information for Consumers. This brochure describes how natural gas is supplied to individual households, and shows the various components that are included in the price a residential customer pays for natural gas. It touches on natural gas industry restructuring at the State level, explaining how this on-going process can affect residential consumers and why they should be interested in it. In addition, the brochure summarizes EIA's projections for the current heating season, including the average heating-season price and likely total cost over the winter for natural gas for the typical residential consumer. The brochure also suggests ways for consumers to save on their natural gas bills.

 

Summary:

Spot prices fell during the week since October 30 with decreases of over 29 cents at most market locations. The futures contract price for December delivery decreased by 54 cents, settling at $3.854 per MMBtu. As of November 1, working gas storage stocks were 3,145 Bcf, 7 Bcf below the level recorded for the same report week last year but nearly 5 percent above the 5-year average.

 

Natural Gas Summary from the Short-Term Energy Outlook