Natural Gas

Overview

Net additions to storage during the fourth week of April were estimated to have been over 100 Bcf�a record high level for the first month of the refill season. Compared to last year when only 36 Bcf or 1.2 Bcf per day were added to stocks in April, this year the industry appears to be taking advantage of the reduction in demand that typically occurs in April, the first shoulder month of the year, and the recent price declines. After beginning the week down, spot prices at the Henry Hub trended down most days last week to end trading on Friday at $4.49 per MMBtu�the lowest price since early November. On the NYMEX futures market, the near-month (June) contract also moved down most days and ended last week at $4.490�down $0.377 from the previous Friday. Some-early summer high temperatures last week in the Northeast and winter-like weather in the Rockies (See Temperature Map) (See Deviation from Normal Temperatures Map) appear to have had little impact on the natural gas markets as prices declined most days at most major locations.

Prices

Spot prices at most major market locations have declined over the last 4 weeks by close to 20 percent. On April 10, the Henry Hub price was $5.56 per MMBtu and at the end of last week it had moved down to $4.49. Examples of other declines for the same time period include: Katy in East Texas, $5.54 to $4.48; Waha in West Texas, $5.48 to $4.40; Midcontinent in Oklahoma, $5.40 to $4.38; and at Opal in Wyoming, $5.02 to $ 3.95.� Prices at the Chicago and New York citygates also followed this pattern as they declined $1.03 and $1.16, respectively, over the same period to end trading last Friday at $4.62 and $4.85.� Though also declining over the same period, prices in southern California were reported to have decreased only 8 percent ($13.51 to $12.39). However, on several intervening days the SoCal price exceeded $14.00 and $15.00 per MMBtu. In sharp contrast, recent price declines in northern California were significant, where increasing gas supplies had PG&E announce an operational flow order at the end of last week. Prices for some trades on the PG&E system were reported below $7.00 during last Friday�s trading and ended the day with a midpoint price of $7.74�33 percent less than on April 10, 2001.�

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On the NYMEX futures market, prices also have generally declined. The price for the near-month contract moved down more than 19 percent from April 10, when the May contract settled at $5.559 per MMBtu, through last Friday, when the June contract settlement price was $4.490. In terms of the June contract itself, its price declined 20 percent as it fell� $1.121 per MMBtu from the $5.611 recorded on April 10 for June delivery volumes. Trading in all contracts through the end of the refill season settled well below $5.00 per MMBtu. Futures contract prices for the next 5 months ranged from $4.490 per MMBtu (June contract) to $4.705 (October contract).�

Storage

The relatively high rate of storage injections, which added an estimated 119 Bcf to stocks during the first 20 days of April, increased sharply during the last full week of the month. The American Gas Association (AGA) reported net injections of 102 Bcf for the week ended Friday, April 27, bringing total working gas inventories to an EIA-estimated 955 Bcf. This weekly injection estimate is equivalent to an average injection rate of 14.6 Bcf per day, dwarfing the 5-year (1996-2000) average rate for the month of April of 3.2 Bcf per day, based on EIA data. All regional stock additions, as well as the national total, easily exceeded the 5-year averages of AGA net injection estimates for this week. East region net injections were more than double the 5-year average of 27 Bcf, while the Producing region more than tripled its average of 10 Bcf. Net injections in these two regions, and the national total as well, were record highs in the 8-year history of AGA estimates, while the West region recorded its second highest level for this week. With 3 days of storage activity in April yet to be reported and net storage injections already estimated at 221 Bcf, this year�s refill season (April to October) is off to its best start in the 25 years that EIA has collected these data. The previous high took place in 1994 when EIA data indicate that 214 Bcf were added in April.

Other Market Trends

Natural gas net imports during the past winter heating season (November to March) are estimated by EIA to have totaled 1,723 Bcf, an increase of over 17 percent compared with the previous winter. Net imports have increased 46 percent since the winter of 1995-96 when they totaled 1,176 Bcf during that heating season, which prior to this year was the last one with colder than normal temperatures. The vast majority of the� imported gas comes from Canada. During the first 4 months of the past heating season (November to February) for which EIA has data, 94.5 percent of natural gas imports came from Canada through several crossborder pipeline systems. These systems have continued to expand to meet the growing U.S. demand for natural gas. Import capacity has increased over 30 percent since 1995. At the end of last year it was reported to be at 14.3 Bcf per day, including an increase of over 1.3 Bcf per day at the end of November 2000 when the Alliance Pipeline System began operations to carry natural gas from Western Canada to the metropolitan Chicago market.

Summary

Prices continued their month-long decline last week and, excluding southern California, traded at their lowest levels since November 2000. The latest estimates of weekly net additions to storage exceeded 100 Bcf and overall stocks are estimated to be 955 Bcf.