Natural Gas

Overview:

Since Wednesday, January 22, natural gas spot prices have decreased at nearly all locations in the Lower 48 States, falling up to $3.18 per MMBtu. For the week (Wednesday-Wednesday), prices at the Henry Hub decreased 6 cents or roughly 1 percent to $5.62 per MMBtu. However, prices hit $6.56 on Thursday, January 23, which is its highest level since late January 2001. The price of the NYMEX futures contract for February delivery at the Henry Hub increased roughly 1 cent per MMBtu since last Wednesday to settle at $5.660 per MMBtu yesterday (January 29) in its final day of trading. Natural gas in storage decreased to 1, 729 Bcf for the week ended Friday, January 24, which is roughly 10 percent below the 5-year average. The spot price for West Texas Intermediate (WTI) crude oil increased 84 cents per barrel or about 3 percent since last Wednesday to trade yesterday at $33.54 per barrel or $5.78 per MMBtu.

 

Prices:

Spot prices generally decreased over the past 7 days, keyed by significant price drops Thursday, Friday, and Tuesday as moderating temperatures mitigated demand for natural gas. The steepest declines since last Wednesday occurred at selected points in the Northeast region where prices fell between $0.50 and $11.68 per MMBtu. The declines in natural gas prices followed a week in which deliveries in the Middle Atlantic region rivaled or exceeded previous historical highs as reported by the trade press (see Other Market Trends section below). Prices at the New York citygate fell $11.68 per MMBtu since last Wednesday, January 22, however, they remain among the highest in the nation at $7.25. Similarly, prices on the Algonquin system, which serves the New England region, tumbled $8.77 per MMBtu since last Wednesday. Prices at most markets outside the Northeast fell up to 48 cents per MMBtu. The overall pattern of declining prices was halted on Wednesday, January 29, as prices at most markets had gains of less than 20 cents.

 

At the NYMEX, the price of the futures contract for February delivery at the Henry Hub declined by about a penny since Wednesday, January 22, to settle at $5.660 per MMBtu on Wednesday, January 29. The price of the futures contracts for March 2003 delivery, the remaining month of the heating season, has increased by roughly 2 cents per MMBtu since last Wednesday.

 

Spot Prices ($ per MMBtu)	Thur.	Fri.	Mon.	Tues.	Wed.
	23-Jan	24-Jan	27-Jan	28-Jan	29-Jan
Henry Hub	6.56	5.92	5.92	5.50	5.62
New York	12.76	10.36	12.66	7.33	7.37
Chicago	6.44	5.67	5.67	5.42	5.50
Cal. Comp. Avg,*	5.51	5.07	5.12	4.86	4.90
Futures ($/MMBtu)
Feb delivery	5.458	5.524	5.396	5.444	5.660
Mar delivery	5.425	5.465	5.291	5.359	5.629
*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 1,729 Bcf for the week ended Friday, January 24, 2003, according to the EIA Weekly Natural Gas Storage Report. This is nearly 10 percent below the 5-year average for the report week, and more than 28 percent below the level last year for the same week (See Storage Figure). However, inventories were nearly 30 percent above the level reported 2 years ago at this time. The implied net withdrawal for the week was 247 Bcf, which is roughly 73 percent higher than the 5-year average of 142 Bcf for the week. This is the second week in a row in which net withdrawals were greater than 200 Bcf and above the 5-year average. Cold temperatures in most regions of the country contributed to the relatively large withdrawals from storage (See Temperature Map) (See Deviation Map). According to the National Weather Service, gas-weighted heating degree-days (HDD) in the New England and Middle Atlantic Census Regions were near record-highs. HDDs in New England and the Middle Atlantic were 24 percent and 27 percent above normal and over 48 percent and 59 percent greater than for the same report week last year, respectively. Similarly, heating degree days were more than 24 percent above normal in the South Atlantic and East South Central regions, exceeding the level last year at this time by more than 73 percent. Owing to respondents' resubmissions of storage data for the week ended January 17, the stocks reported for that date were revised downward 9 Bcf to 1,976 Bcf.

 

All Volumes in Bcf	Current Stocks 1/24/03	Estimated Prior 5-Year (1998-2002) Average	Percent Difference from 5 Year Average	Implied Net Change from Last Week	One-Week Prior Stocks 1/17/03
East Region	946	1,133	-16.5%	-165	1,111
West Region	296	251	17.9%	-18	314
Producing Region	487	535	-9.0%	-64	*551
Total Lower 48	1,729	1,919	-9.9%	-247	*1976
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. *Revised

 

Other Market Trends:

Natural Gas Utilities Report Record Deliveries: According to the trade press and company reports, numerous local distribution companies (LDCs) reported record deliveries last week as a blast of Arctic air produced this winter's coldest temperatures to date throughout the East Coast. PSE&G, New Jersey's largest utility with 1.6 million natural gas customers, said it delivered about 2,425,200 MMBtu (approximately equal to 2.36 Bcf) on January 23, when the average temperature was 13.4 degrees Fahrenheit. In KeySpan's service area of Brooklyn, Queens, and Staten Island, deliveries on January 24 reached 1,085,611 MMBtu (1.06 Bcf), which is about 36 percent more than the average of 800,000 MMBtu (0.78 Bcf) delivered on a typical January day, and almost 1 percent more than the utility's previous record peak send-out delivered on January 17, 2000. In KeySpan's Long Island service territory, customers consumed a record 667,930 MMBtu (0.65 Bcf), which was 48 percent higher than what is usually required in late January, according to the utility. With the cold reaching deep into the Southeast, Piedmont Natural Gas, which serves 740,000 customers in North Carolina, South Carolina, and Tennessee, delivered about 1,290,000 MMBtu (1.26 Bcf) to customers. The deliveries surpassed the old peak-day record demand of 1,070,000 MMBtu (1.04 Bcf), set January 14, 1999. At least one interstate pipeline also reported record deliveries. Transcontinental Gas Pipe Line, an interstate pipeline that delivers approximately two-thirds of the natural gas used in New York, New Jersey, and Pennsylvania, said that it delivered about 8,340,000 MMBtu (8.12 Bcf) on January 23–roughly 14 percent higher than Transco's previous record set on March 4, 2002.

 

Natural Gas Rig Counts: The number of rigs drilling for natural gas climbed by 14 to 726 for the week ending January 24, according to Baker-Hughes Incorporated. This is the highest rig count for gas well drilling since the end of September 2002. Natural gas rigs are roughly 2 percent above last year at this time, and 3.5 percent above the overall average for 2002. Average natural gas rigs for the month of January 2003 were 716. Rigs drilling for natural gas last week constituted 84.2 percent of rigs drilling in the United States. Although this is down slightly from the 86 percent level recorded in September 2002, it remains quite high relative to history. Gas drilling exceeded the 84 percent level for the first time in December 2001. The share of rigs drilling for natural gas has been consistently above 80 percent since April 2001. The emphasis on gas prospects undoubtedly reflects a relative advantage in the economics of natural gas prospects compared with domestic crude oil prospects.

 

Summary:

The net decline in spot prices during the week since January 22 was up to 50 cents at most market locations outside of the Northeast, despite very large one-day increases on Thursday, January 23. The futures contract price for February delivery decreased by 1 cent, settling at $5.660 per MMBtu. As of January 25, working gas storage stocks were 1,729 Bcf, which is about 10 percent below the 5-year average but still well within the operating range of the past 5 years.

 

Natural Gas Summary from the Short-Term Energy Outlook