for week ending June 17, 2001 | Release date: June 18, 2001 | Previous weeks
Overview:
Prices ended the week up
slightly from where they started as a brief heat wave in the eastern half of
the country caused a rise in prices (See
Temperature Map) (See Deviation from Normal
Temperatures Map) that was somewhat undone by the return of moderate temperatures and
the report of another hefty stock build.On a Friday-to-Friday basis, the spot price at the Henry Hub increased
by $0.25 to $3.88 per MMBtu compared with an increase of $0.23 to $0.33 at
other major supply points in the eastern half of the country.In the same time period, the near-month
(July delivery) futures contract was up less than 6 cents to $3.979 per MMBtu
as of Friday, June 15, 2001. Prices in California rose substantially last
Monday after coming off high inventory flow orders (OFOs) but ended the week
close to or lower than the previous week due to another round of OFOs.For the past 7 weeks, weekly storage
injections neared or exceeded 100 Bcf, bringing stocks to within less than a 1
percent difference from average levels.The string of record-breaking stock builds appears attributable to
moderate spring temperatures and reduced cooling demand by natural-gas-fired
electricity generation.
Prices:
Prices rose early in the week as traders positioned
for midweek temperatures in the 90s in the Northeast and Midwest. Gains began
to erode on Thursday following the American Gas Association's (AGA)
announcement of storage injections of 105 Bcf.Spot prices continued to lose ground through Friday but showed small
gains for the week that ranged from 23 cents per MMBtu at the Midcon facility
in Oklahoma to 33 cents in Waha, Texas.Citygate prices were $4.24 and $3.81 per MMBtu in New York and Chicago
after rising 34 and 17 cents, respectively, during the week.The lifting of high inventory OFOs in
California ushered in price increases early in the week, then mild temperatures
brought about another round of OFOs by week's end.On Friday, the price for large package sales on the SoCal system
was up 20 cents to $3.74 per MMBtu, and on the PG&E system, up only 10
cents to $3.02.
The NYMEX contract for July delivery paralleled the
movement in the cash market with a strong opening in the beginning of the week
as traders anticipated the impact of warm weather, then a drop-off at the end
of the week as temperatures and demand receded. On Friday, the near-month
contract settled at $3.979 per MMBtu, up 5.7 cents from the previous Friday
(June 8). Futures prices are still providing a strong incentive to store gas by
growing more than the 2 to 3 cents per MMBtu per month that industry experts
believe is required to cover costs.Of
Friday, June 15, 2001, the December and January contracts had prices of $4.545
and $4.608 per MMBtu, roughly 60 cents above current cash prices at the Henry
Hub.
Spot Prices ($ per MMBTU)-Selected
Trading Centers |
Mon. 6/11 |
Tues. 6/12 |
Wed. 6/13 |
Thur. 6/14 |
Fri.6/15 |
---|---|---|---|---|---|
Henry Hub |
3.86 |
4.00 |
4.14 |
3.94 |
3.88 |
New York citygates |
4.25 |
4.46 |
4.62 |
4.38 |
4.24 |
Chicago citygates |
3.90 |
4.04 |
4.17 |
3.91 |
3.81 |
Northern CA PG&E |
3.39 |
3.89 |
3.64 |
3.52 |
3.02 |
Southern CA (SOCAL) |
6.74 |
7.60 |
8.47 |
6.90 |
3.74 |
Futures (Daily
Settlement, $MMBTU) |
|
|
|
|
|
July Delivery |
4.179 |
4.301 |
4.112 |
4.038 |
3.979 |
August Delivery |
4.271 |
4.397 |
4.211 |
4.123 |
4.065 |
Source: Financial Time
Energy, Gas Daily |
Storage:
Net injections to storage returned to
record-breaking levels during the week ended June 8, 2001 as 105 Bcf was added
according to AGA estimates. At the high end of industry's expectations, this
net addition was 29.6 percent more than the 6-year (1995-2000) average and
bested the previous record of 93 Bcf established during the same week of 1994 (See Storage Figure).Additions in the Producing region were 62.0
percent above average compared with 19.3 percent in the East and 31.3 percent
in the West regions.Although working
gas stocks were at a record low at the end of the past heating season, the
cumulative net injections of 874 Bcf through June 8 set a new record for the
period, being 28.2 percent above the previous high level for this period in
1998. Total stocks are only 0.9 percent below normal and regional stocks are
well within the normal range, yet the West remained below the 6-year average by
an estimated 4.5 percent.Even if net
injections were to slow to an average pace through the end of the refill
season, stocks would open the heating season on November 1 at 2.9 Tcf, just shy
of the unofficial industry target of 3 Tcf for that time of year.
All Volumes
in BCF |
Current
Stocks (Fri,6/8) |
Estimated
6-Year (1995-2000) Average |
Percent
Difference from 6 Year Average |
Net Change
from Last Week |
One-Week
Prior Stocks (Fri,6/1) |
|
---|---|---|---|---|---|---|
East Region |
883 |
885 |
-0.3% |
64 |
819 |
|
West Region |
244 |
256 |
-4.5% |
14 |
230 |
|
Producing Region |
489 |
489 |
-0.1% |
27 |
462 |
|
Total Lower 48 |
1,616 |
1,630 |
-0.9% |
105 |
1,511 |
|
Note:net change data are estimates published by
AGA on Wednesday of each week.All
stock-level Figures are EIA estimates based on EIA monthly survey data and
weekly AGA net-change estimates.Column sums may differ from Totals because of independent
rounding. |
||||||
Other Market Trends:
On a Btu-basis, natural gas continues to have a cost
advantage over other fuels, such as distillate oil.For example, the New York citygate price of natural gas was $4.24
per MMBtu on Friday, showing at least a $1.00 differential that has persisted
since mid-May. On Friday, June 15, 2001, the price of spot heating oil in the
New York Harbor was 80.10 cents per gallon or $5.78 per MMBtu after reaching
83.05 cents per gallon the previous day, the highest level since the middle of
April according to Reuters News Service.The cost advantage should attract dual-fired users to consume natural
gas, though this week's short-lived price rise in advance of warm temperatures
caused some traders to speculate that the cost advantage may erode if cooling
demand is brisk.
Summary:
Prices continued the previous week's pattern by
rising early in the week then falling based on a report of another large stock
build.The potential for additional
demand from the industrial sector along with warm weather and cooling demand from
gas-fired electricity generation could cause the prices of natural gas to rise
and discourage net injections into storage. However, this effect on net
injections could be offset if prices on contracts for future delivery remain
well above current prices plus monthly carrying costs.