for week ending July 2, 2001 | Release date: July 2, 2001 | Previous weeks
The overall decline in spot
prices accelerated last week, as continued below-normal temperatures in
significant portions of the country suppressed electricity demand for
air-conditioning use and storage injections once again hit record-setting
levels.Temperatures averaged in the
80s for most of the eastern half of the nation, with slightly cooler
temperatures prevailing along much of the populous West coast. (See Temperature Map) (See
Deviation from Normal Temperatures Map).Futures market prices reinforced the general price weakness, with
contracts for future deliveries falling 5 days in a row.
Prices:
The key factors of increased supply and very little
weather-generated swing demand sent prices lower in spot markets throughout the
country, with the majority showing declines every day of the week. Average
temperatures last week were as much as 7 degrees below normal in the usually
high summertime electricity demand areas of the Midwest, Southeast, Gulf Coast,
and eastern Texas.In addition,
temperatures were normal to slightly below normal in southern California, and
cooler still in northern California. By Friday, the low end of the common
trading range for spot gas at the Henry Hub fell below $3.00 per MMBtu for the
first time since April 2000, and by the end of Friday trading, the Henry Hub
midpoint price had dropped $0.69 per MMBtu from the previous Friday to an even
$3.Spot prices under $2 per MMBtu were
seen at some Rockies trading points on Friday.Only in the Northeast were prices able to buck the downward trend, where
hot, muggy weather early in the week had New York citygate prices rising for
several days to the week's high point on Wednesday of $4.34 per MMBtu—up 27
cents from the previous Friday.But by
Thursday, with temperatures beginning to moderate, Northeast prices joined in
the overall downward trend so that by Friday, the price at TRANSCO Zone 6 for
New York delivery had fallen to $3.50 per MMBtu.While spot prices jumped on Monday on both SOCAL and PG&E as
these systems lifted their respective weekend high-inventory operational flow
orders (OFO), the over $2 increase on SOCAL (to around $6.06 per MMBtu) and
nearly 25-cent increase on PG&E (to about $4.00) were easily overwhelmed by
the week-long demand weakness.By
Friday, the spot price on SOCAL had fallen to $3.83 per MMBtu, while on
PG&E, spot prices fell nearly a dollar from the previous Friday, dipping
below $3 at $2.79 per MMBtu.
With working gas inventories continuing to grow at
very high rates, and little to suggest the possibility of significant
demand-boosting hot summer temperatures in the near future, futures prices fell
significantly last week.The July
contract closed out on Friday at $3.182 per MMBtu–the lowest settlement price
for a near-month contract since early May of last year, and $1.187 per MMBtu
lower than the closing price of the July 2000 contract ($4.369).After Tuesday, June 19, when the July
contract briefly rallied to just under $4 ($3.981 per MMBtu), it lost 20
percent of its value.On its first day
of trading as the near-month contract, the contract for August delivery
benefited from somewhat lighter trading and a narrow trading range, losing just
a fraction of a cent from the previous day to settle at $3.280 per MMBtu, as
the market took a day to catch its breath and reevaluate.On Friday, however, the downturn resumed, as
the August contract fell $0.184 to settle at $3.096 per MMBtu.Also on Friday, the last “holdout” for
$4-plus gas for upcoming winter delivery–the December 2000 contract–finally
fell below $4, settling at $3.900 per MMBtu.
Spot Prices ($ per MMBTU)-Selected
Trading Centers |
Mon. 6/25 |
Tues. 6/26 |
Wed. 6/27 |
Thur. 6/28 |
Fri.6/29 |
---|---|---|---|---|---|
Henry Hub |
3.56 |
3.45 |
3.39 |
3.22 |
3.00 |
New York citygates |
4.12 |
4.28 |
4.34 |
4.03 |
3.50 |
Chicago citygates |
3.55 |
3.42 |
3.39 |
3.17 |
3.01 |
Northern CA PG&E |
4.00 |
3.39 |
2.96 |
2.99 |
2.79 |
Southern CA (SOCAL) |
6.06 |
4.69 |
4.68 |
4.31 |
3.83 |
Futures (Daily
Settlement, $MMBTU) |
|
|
|
|
|
July Delivery |
3.446 |
3.397 |
3.182 |
|
|
August Delivery |
3.521 |
3.479 |
3.286 |
3.280 |
3.096 |
Source: Financial Times
Energy, Gas Daily |
Storage:
The unprecedented rate of storage refill continued
for yet another week, as the American Gas Association (AGA) estimated that net
injections were 108 Bcf for the week ended Friday, June 22 (See Storage Figure).This
marks the third consecutive week of record-setting injections at the national
level and the eighth week this refill season in which storage injections have
topped 100 Bcf.Net injections of 68
Bcf in the East region and 12 Bcf in the West region were also the highest ever
for this week.Producing region
injections were the second highest, and exceeded the 6-year (1995-2000) average
for this week by 40 percent.Estimated
net injections since April 1 total 1,090 Bcf, which is 53 percent greater than
the 6-year average to this point in the year (712 Bcf).With these record injections, total U.S.
stocks are now slightly above the EIA-estimated 6-year average despite
beginning the refill season at an all-time low of 742 Bcf (EIA data).However, the West region still lags behind
the 6-year average by nearly 5 percent.
All Volumes
in BCF |
Current
Stocks (Fri,6/22) |
Estimated
6-Year (1995-2000) Average |
Percent
Difference from 6 Year Average |
Net Change
from Last Week |
One-Week
Prior Stocks (Fri,6/15)* |
|
---|---|---|---|---|---|---|
East Region |
994 |
993 |
0.1% |
68 |
926 |
|
West Region |
261 |
274 |
-4.8% |
12 |
249 |
|
Producing Region |
558 |
519 |
7.4% |
28 |
530 |
|
Total Lower 48 |
1,813 |
1,786 |
1.5% |
108 |
1,705 |
|
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. *Revised to incorporate
EIA survey data for April 2001. |
||||||
Other Market Trends:
According to data collected by Baker Hughes, Inc.,
the number of drilling rigs exploring for natural gas continued to increase
during the month of June, reaching the weekly average level of 1,050.This is 53 higher than the May weekly
average of 997, and is 55 percent greater than for June 2000.The historically high natural gas prices of
last fall and winter spurred the steady increase in the rig count, but, as spot
prices at the Henry Hub settle lower and lower, it is anticipated that at some
point the rig count will begin to decrease.
Summary:
The continued lack of significant summer heat
coupled with record high injection levels and a vastly improved inventory
situation kept up significant downward pressure on both cash and futures
prices.Lower prices may eventually
lead to fewer rigs exploring for gas, thereby stemming the growth in
production.