for week ending July 29, 2001 | Release date: July 30, 2001 | Previous weeks
Prices rose slightly mid-week with the return of summer weather and a
reported slowing of net injections to storage for the prior week.Temperatures for the week reverted close to normal
in the Northeast and as much as 3 degrees above normal in the Midwest. (See Temperature Map) (See
Deviation from Normal Temperatures Map) In a pattern typical for
this summer, spot prices declined toward the end of the week as a cool front
pervaded the eastern half of the country.However, the spot price at the Henry Hub was able to hold onto a 12-cent
gain over the week to close at $3.07 per MMBtu on Friday.The August contract finished as the
near-month contract on a slightly higher note on the last day of trade to close
at $3.167 per MMBtu due to short-covering and a forecast for warmer weather in
the upcoming week.The August contract
ended less than 2 cents lower than the July contract for the lowest closure
since May of last year.On the West
Coast, the cancellation of high-linepack operational flow orders allowed prices
to buoy upward by about $1 per MMBtu early in the week. As coastal areas remained
cool though, price declines offset much of the gain. For only the third week in
the last 2 months, the American Gas Association (AGA) estimated net injections
to storage at less than 100 Bcf as they reported 84 Bcf for the week ended
Friday, July 20.An OPEC agreement to
reduce production quotas by 1 million barrels per day helped prop-up crude oil
prices.As of Friday, the spot price
for West Texas Intermediate was $27.05 per barrel, or $4.66 per MMBtu, $1.45
per barrel more than a week earlier.
Prices:
Cash prices in many major
markets opened the week roughly 5 cents to 20 cents per MMBtu higher in
reaction to hot weather on the East Coast and presumably more demand from
gas-fired electricity generation for space cooling purposes. After languishing
at fairly stable levels, prices were propelled higher at mid-week by the report
of slowed storage injections and a prediction of warmer temperatures starting
August 1. Spot prices rose on Thursday in the 13- to 26-cent range but lost 15
to 30 cents on Friday. At Waha, Texas, the price reached $3.26 per MMBtu before
declining back to $2.96 on the last day of the week; at Katy, Texas, comparable
figures were $3.30 and $3.09, and at Midcon, Oklahoma, $3.14 and $2.92.
Citygate prices were $3.32 and $3.03 per MMBtu in New York and Chicago after
rising to as much as $3.56 and $3.29, respectively, during the week. The
largest price surges to start the week were recorded in California, where spot
prices at the border and to large package customers were higher by at least $1 through
Wednesday, but then lost ground when the desert heat failed to reach the
coast.By Friday, large package sales
on the PG&E system were down to $2.91, only 54 cents more than a week ago
and on SoCal were $3.08-18 cents more than a week
ago.
The August
futures contract price on Monday settled 2.3 cents higher than where the
previous week left off.The price
stalled in advance of the report citing a slower stock build, which then caused
almost a 31-cent gain over the course of the trading day on Wednesday. After a
14.8-cent correction the following day, short covering and a forecast of warmer
weather contributed to a 3.9 cent gain on Friday for a closing price of $3.167
per MMBtu for the August contract.Cash
and the near-month prices have gotten high enough for some traders to speculate
that it may be more cost-effective to sell rather than store gas.However, on Friday, the September price
differential was in the 2 to 3 cent range needed to justify storage for
short-term purposes.Additionally, the
December and January futures contracts were more than 59 cents above the
current near-month price, providing an incentive to stock-up for the peak
winter months.
Spot Prices ($ per MMBTU)-Selected
Trading Centers |
Mon.7/23 |
Tues. 7/24 |
Wed. 7/25 |
Thur. 7/26 |
Fri.7/27 |
Henry Hub |
3.01 |
3.01 |
3.06 |
3.27 |
3.07 |
New York citygates |
3.49 |
3.50 |
3.44 |
3.56 |
3.32 |
Chicago citygates |
3.01 |
2.98 |
3.03 |
3.29 |
3.03 |
Northern CA PG&E |
3.39 |
3.65 |
3.53 |
3.11 |
2.91 |
Southern CA (SOCAL) |
4.09 |
4.44 |
4.00 |
3.63 |
3.08 |
Futures (Daily
Settlement, $MMBTU) |
|
|
|
|
|
August Delivery |
2.978 |
2.970 |
3.276 |
3.128 |
3.167 |
September Delivery |
3.015 |
2.997 |
3.295 |
3.155 |
3.194 |
Source: Financial Times
Energy, Gas Daily |
Storage:
Net injections into storage
were 84 Bcf for the week ended Friday, July 20, according to AGA estimates,
marking the second week in a row that the industry added a net volume of working
gas below 100 Bcf after 6 consecutive weeks in which the net additions exceeded
that threshold (See
Storage Figure). (For the prior week, AGA's net-change estimate
of 110 Bcf consisted of an estimated 96 Bcf of net injections, plus an
additional 14 Bcf attributed to corrected data from prior weeks.) It is also
the first time in at least 6 weeks that estimated net injections were below
what several industry publications reported as prevailing market expectations
for net injections for the week, namely 90-100 Bcf.Although below expectations, the 84 Bcf stock build is the
largest in 5 years for the report week, and is 33 percent greater than the
6-year (1995-2000) average.Nevertheless, upon release of the AGA report, futures prices on the
NYMEX leapt upward, with the August contract gaining around 15 cents per MMBtu
in the first few minutes after the 2 PM release.Through July 20, net injections for the month of July have been
an estimated 289 Bcf[jt11], equivalent to an average
daily rate of almost 14.5 Bcf, 51 percent above the 6-year average for the
month.If net storage additions for the
balance of the refill season were to match EIA 6-year average daily rates,
inventories will reach 3,090 Bcf by November 1.
All Volumes
in BCF |
Current
Stocks (Fri,7/20) |
Estimated
6-Year (1995-2000) Average |
Percent
Difference from 6 Year Average |
Net Change
from Last Week |
One-Week Prior
Stocks (Fri,7/13) |
|
East Region |
1,249 |
1,204 |
3.8% |
60 |
1,189 |
|
West Region |
318 |
302 |
5.3% |
11 |
307 |
|
Producing Region |
655 |
561 |
16.7% |
13 |
642 |
|
Total Lower 48 |
2,222 |
2,067 |
7.5% |
84 |
2,138 |
|
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. |
||||||
Additions to gas-fired
electricity generation capability are continuing at a brisk pace with the opening
of such facilities as the 537 megawatt plant in Cordova, Illinois and the 2,000
megawatt plant in Phoenix, Arizona. Assuming standard heat rates, these plants
would consume 130 MMcf and 484 MMcf per day of natural gas, respectively, at
peak summer output. In California, the first major power plant since 1988
commenced operations on June 27, 2001. The 320 megawatt gas-fired facility,
known as the Sunrise Power Project, is a located in Kern County.A week later, the 500 megawatt gas-fired
Sutter power plant near Yuba City came on line. Conservation, cooler
temperatures, and distributed power generation along with production from new
facilities have helped ease tightness in the State's electricity supplies.
According to EIA, in the
first 3 months of this year, the nation has added 1,100 gigawatts of gas-fired
generating capacity, compared with 1,900 gigawatts added in 2000 and 500
gigawatts in the prior year. (These data do not include cogeneration
capability.)Of the total capacity
additions in the first quarter of 2001, natural gas capacity represented 75
percent.
Summary:
A slowing
in the rate of storage injections and warmer weather contributed to higher
prices by the middle of last week, but the easing of temperatures allowed prices
to retreat going into the weekend. Additional natural gas-fired electricity
generating capacity could support even higher demand over the next month if
temperatures cause the need for increased space cooling.
[jt11]Adjusted end-of-June inventories were 1,933 Bcf.