Natural Gas

Overview:

Colder-than-expected weather over the Thanksgiving weekend that continued into this week resulted in higher natural gas spot prices at most trading locations since Wednesday, November 26. While prices at several Northeast trading locations climbed more than $0.70 per MMBtu, prices along the Gulf Coast increased a more modest $0.50-$0.60. On the week (Wednesday, November 26-Wednesday, December 3), the Henry Hub spot price rose $0.59 per MMBtu to $5.45, closing above $5 for the first time since late August. At the NYMEX, the price of the futures contract for January delivery increased $0.83 per MMBtu, or 12 percent, to $5.756 per MMBtu. Natural gas in storage as of Friday, November 28, decreased by 59 Bcf to 3,095 Bcf, which exceeds the 5-year average by 3.9 percent. The spot price of West Texas Intermediate (WTI) crude oil dropped $0.13 per barrel in trading yesterday (Wednesday, December 3), but rose a modest $0.28 on the week, settling at $30.61 per barrel, or $5.28 per MMBtu.

Prices:

After a Thanksgiving week with no trading on Thursday or Friday, spot gas prices adjusted to colder-than-expected weather across much of the country, including key gas-consuming areas in the Midwest and Northeast. The Henry Hub spot price gained 16 cents per MMBtu to $5.02 on Monday, December 1, then increased an additional 43 cents on Tuesday to an average of $5.45. The Henry Hub price traded flat on Wednesday, ending the week 12 percent higher in a Wednesday-Wednesday comparison. Gains in the Northeast were considerably higher at up to 75 cents per MMBtu on the week. With demand for space heating on Monday and Tuesday driving trading, the price at the New York citygate increased by a combined $1.62 per MMBtu for the two days to a high on the week of $7.09 before dropping yesterday to $6.15 per MMBtu. Prices at other Northeast citygates also moved up sharply early this week, as Algonquin Gas Transmission in New England implemented its first weather-induced flow restrictions, boosting prices off the pipeline to more than $8 on Tuesday. However, those prices also fell yesterday as weather predictions for next week have been mixed. With slightly milder weather in the West, prices in California moved up more modestly on the week, rising 23 cents to $4.91. Meanwhile, price increases in Rocky Mountain market locations ranged from 14 to 35 cents per MMBtu.

 

The NGWU was not published during Thanksgiving week. Below is a table that contains the natural gas price data for that week.

Spot Prices ($ per MMBtu)	Thur.	Fri.	Mon.	Tues.	Wed.
	20-Nov	21-Nov	24-Nov	25-Nov	26-Nov
Henry Hub	4.36	4.14	4.57	4.48	4.86
New York	4.72	4.41	5.16	4.93	5.47
Chicago	4.52	4.40	4.81	4.72	4.86
Cal. Comp. Avg,*	4.49	4.44	4.65	4.50	4.68
Futures ($/MMBtu)
Dec delivery	4.618	4.634	4.682	4.860	Expired
Jan delivery	4.904	4.921	4.930	5.050	4.925
Feb delivery	4.944	4.966	4.970	5080	4.962
*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).

 

Spot Prices ($ per MMBtu)	Thur.	Fri.	Mon.	Tues.	Wed.
	27-Nov	28-Nov	1-Dec	2-Dec	3-Dec
Henry Hub	Holiday	Closed	5.02	5.45	5.45
New York	Holiday	Closed	6.51	7.09	6.15
Chicago	Holiday	Closed	5.10	5.44	5.43
Cal. Comp. Avg,*	Holiday	Closed	4.69	4.98	4.91
Futures ($/MMBtu)
Jan delivery	Holiday	Closed	5.283	5.579	5.756
Feb delivery	Holiday	Closed	5.278	5.565	5.716
*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).

 

At the NYMEX, the settlement price for the futures contract for January delivery at the Henry Hub has gained in value in three of the four trading sessions since becoming the near-month contract on November 26. The January contract closed yesterday at $5.756 per MMBtu, up slightly more than 83 cents, or 17 percent, on the week. The January contract is trading at a high since mid-October, as weather shifts from the warmer-than-normal temperatures across the country during the month of November (See Other Market/Industry Trends below). Additionally, yesterday's closing price of $5.756 was the highest price for a near-month contract since June of this year. The February contract rose slightly less than the near-month contract--about 75 cents per MMBtu--on the week to $5.716. Further out, the April contract, which typically represents the first month following the heating season, gained a modest 26 cents to a close of $4.863 per MMBtu. The 12-month strip, or the average price of the futures contracts for each month in 2004, on Wednesday closed at $5.055 per MMBtu, up 32.3 cents on the week.

 

Estimated Average Wellhead Prices
	May-03	Jun-03	Jul-03	Aug-03	Sep-03	Oct-03
Price ($ per Mcf)	4.97	5.35	4.91	4.72	4.58	4.43
Price ($ per MMBtu)	4.84	5.21	4.79	4.60	4.46	4.32
Note: The price data in this table are a pre-release of the average wellhead price that will be published in forthcoming issues of the Natural Gas Monthly. Prices were converted from $ per Mcf to $ per MMBtu using an average heat content of 1,025 Btu per cubic foot as published in Table A2 of the Annual Energy Review 2001.
Source: Energy Information Administration, Office of Oil and Gas.

 

Storage:

Working gas in underground storage decreased to 3,095 Bcf as of the week ended Friday, November 28, according to EIA's Weekly Natural Gas Storage Report. Inventories now stand 3.9 percent, or 117 Bcf, above the 5-year average of 2,978 Bcf. (See Storage Figure). Additionally, following a relatively mild November, inventories are 4.7 percent, 139 Bcf, higher than last year's level at this time of 2,956 Bcf. The implied net withdrawal was 59 Bcf, which is the largest withdrawal so far this heating season. In the most recent 5 years, 1998-2002, large withdrawals of 73 Bcf and 91 Bcf occurred in 2000 and 2002, but net injections occurred during the other three years. During the week ending November 29, the weather for the country as a whole was approximately 2 percent warmer than normal and 10 percent warmer than last year, as measured by heating degree days (HDDs) published by the National Weather Service (See Temperature Map) (See Deviation Map). However, in the major gas-consuming regions, differences from the norm and last year were more pronounced. The Middle Atlantic experienced weather about 16 percent warmer than normal and 26 percent warmer than last year. In the East North Central, which includes Chicago and other Midwest population centers, HDDs numbered 8 percent less than normal and 18 percent less than last year.

 

All Volumes in Bcf	Current Stocks 11/28/03	One-Week Prior Stocks 11/21/03	Implied Net Change from Last Week	Estimated Prior 5-Year (1998-2002) Average	Percent Difference from 5 Year Average
East Region	1,824	1,859	-35	1,799	1.4%
West Region	383	392	-9	368	4.1%
Producing Region	888	903	-15	812	9.4%
Total Lower 48	3,095	3,154	-59	2,978	3.9%
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/Industry Trends:

Weather Stays Mild During the First Month of the Heating Season: Warmer-than-normal weather has prevailed throughout the country so far this heating season, which traditionally begins on November 1. During the month of November, temperatures were 11 percent higher than normal for the country as a whole, as measured by heating degree days (HDDs) published by the National Weather Service, and 12 percent warmer than year-ago levels.. Temperatures have been particularly mild in key markets for residential heating, including major population centers in the Middle Atlantic and Midwest. The Middle Atlantic Census Division has been 16 percent warmer than normal thus far in the heating season, while the East North Central Division has been 15 percent warmer than normal.  Only two parts of the country, the Pacific and Mountain regions, experienced colder-the-average temperatures during the month. In November, HDDs numbered about 2 percent more than average in the Rockies, while on the West Coast HDDs were 10 percent more than normal. HDDs are also considerably more than last year at about 33 percent higher in the Pacific and 8 percent more in the Mountain division.

 

Exports to U. S. Dropping According to Canadian National Energy Board: Exports of natural gas from Canada to the United States fell by nearly 10 percent year-on-year for the month of August, dropping from 325.8 Bcf in August 2002 to 293.9 Bcf this August, according to the most recent data on natural gas trade published by the National Energy Board (NEB) of Canada. According to NEB statistics, this marks the eighth month in a row that Canadian gas exports to the United States have declined year-on-year. Total exports to the United States in the first 10 months of the gas-contract year (November 1 through October 31, as defined by the NEB) declined by almost 3 percent, from 3.07 Bcf to 2.99 Tcf. Canadian domestic demand increased by about 4 Bcf or 3 percent to 140 Bcf in August 2003 compared with the prior year. On the other hand, production decreased by about 15 Bcf year-on-year (3 percent) to 481 Bcf, underscoring the fact that shrinking supply, rather than the diversion of supply to domestic markets, seems to be the dominant factor behind the declining exports. Related to these trends, there have been sharply higher prices on both sides of the border. The average price for Canadian gas at the international border in August 2003 was $4.62 per MMBtu, compared with $2.60 in August 2002, an increase of nearly 78 percent. On a regional basis, cumulative current gas-contract year exports through August 2003 to the U.S. Midwest and Northeast increased while Canadian deliveries to California and the Pacific Northwest declined. While Canadian shipments increased by 2 and 4.4 percent, respectively, to the Midwest and Northeast, they fell by nearly 13 and almost 20 percent, respectively, in California and the Pacific Northwest.

 

Summary:

Reflecting higher aggregate demand across the country, prices in the producing regions generally increased $0.40-60 per MMBtu on the week. Cold weather in the Northeast this week lifted prices in the region by more than $0.70 per MMBtu at many trading locations since last Wednesday. Storage withdrawals were the highest of the season to date, with the industry pulling a net 59 Bcf for the week ending November 28. At 3,095 Bcf, however, inventories are still 3.9 percent more than the 5-year average.

 

Natural Gas Summary from the Short-Term Energy Outlook