Current Natural Gas Spot Prices:
Well Above the Recent Price Range

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• The surge in spot prices at the Henry Hub since April has taken prices well above a typical range for 1998-1999 (in this context, defined as the average, +/- 2 standard deviations).

• The upper bound on the typical range for 1998-99 is less than one-third of recent spot prices.

• The Henry Hub spot price spiked at $10.53 per MMBtu on December 29.

• Concerns over supply this winter drove prices up. These concerns stemmed from:
  • low drilling levels in 1998 and 1999 contributing to relatively flat production
  • increased demand for natural gas as the economy has grown, especially from the electricity generating sector
  • expectations for a colder winter than experienced in the last few years (generally borne out so far this heating season)
  • low levels of natural gas in storage

• Natural gas spot prices have dropped in the past few weeks, with Henry Hub falling under $7 per MMBtu on January 24, and have remained under $6 since February 12.