Natural Gas Spot Prices:.Base Case and 95% Confidence Interval
Sources: History: Natural Gas Week;
Projections: Short-Term Energy Outlook, February 2001.
Notes:
- Spot wellhead prices last summer averaged well over $4.00 per thousand cubic feet during a normally low-price season. During the fall, these prices stayed above $5.00 per thousand cubic feet, more than double the year-ago average price. In January, the spot wellhead price averaged a record $8.98 per thousand cubic feet. Spot prices at the wellhead have never been this high for such a prolonged period.
- The chief reason for these sustained high gas prices was, and still is, uneasiness about the supply situation. Concern about the adequacy of winter supplies loomed throughout most of the summer and fall as storage levels remained significantly depressed. Last December, the most severe assumptions about low storage levels became real, when the spot price closed for the day at over $10.00 per cubic feet on several occasions.
- The low levels of gas storage have put the spot market in an extremely volatile position. However, heating demand was eased by milder than normal weather during the latter part of January in much of the nation's gas consuming regions. This in turn led to spot prices plunging to less than $6.00 per thousand cubic feet. Nevertheless, spot prices and wellhead prices still remain quite high by historical standards.
- The current forecast has prices dropping to $4.28 per MCF on average for the summer (versus $6.48 over this past winter). While this is over a $2 decline from winter, it is similar to last summer’s high prices.