for week ending August 12, 2001 | Release date: August 13, 2001 | Previous weeks
Spot prices for natural gas
appeared to stabilize just above the$3.00 mark during the week ended August 10, 2001, as the price at the
Henry Hub in Louisiana varied between $3.14 and $2.98 per million Btu.Net injections of natural gas into storage
for the previous week again fell within the range of market expectations
reported in the trade press and contributed to the stability of the price
level.However, due to warmer-than-normal
temperatures in the Northeast, Midwest, and parts of the Southwest and
Southeast, prices at the Henry Hub increased early in the week before
decreasing and finishing over 2 percent lower than the previous week.(See
Temperature Map) (See
Deviation from Normal Temperatures Map). The price of West Texas
Intermediate (WTI) crude oil finished the week at $28.10 per barrel or $4.84
per million Btu, an increase of almost 2 percent above the previous Friday.
Prices:
The threat from Tropical Storm Barry dissipated as
it was downgraded to a tropical depression shortly after making landfall in the
Florida panhandle on Sunday night August 5, without having any apparent lasting
effect on production or prices.However,
above-normal temperatures throughout much of the country caused spot prices to
increase early in the week before coming back down as the week progressed.Spot prices peaked on Tuesday at the Henry
Hub, Chicago, northern California (PG&E), and southern California (SoCal)
at $3.14, $3.18, $3.40, and $3.65 per million Btu, respectively.Spot prices in New York, which faced record
high temperatures, continued to rise through Wednesday and peaked at $4.14 per
million Btu.However, a predicted cold
front that moved into the Northeast later in the week brought[jt11] cooler temperatures and
helped lower demand and prices.For the
week, spot prices finished lower on Friday than the prior week in many parts of
the country.Prices at the Henry Hub,
SoCal, and PGE&E continued their movement toward more typical relative
patterns throughout the week.The basis
differential between the Henry Hub and SoCal averaged $0.37 per million Btu,
and $0.17 per million Btu between the Henry Hub and PG&E, which approached
their historical averages prior to November 2000 of about $0.21 and $0.13 per
million Btu, respectively. In contrast, the spot price in New York diverged
sharply from the Henry Hub as the basis differential between the points grew to
about $1.05 on Wednesday. However, the New York citygate spot price finished
the week a little over 1 percent lower than the previous week as markets
adjusted and temperatures became more moderate in the Northeast.
The NYMEX futures contract for September delivery at
the Henry Hub fluctuated closely around the $3.00 mark.Instead of following the Henry Hub spot
price increase early in the week, the September futures contract declined on
Tuesday and rose on Wednesday to $3.036 per million Btu before falling again
the following day.Although the trade
press reported some hopes that prices will rally, with the market awash in
supplies and storage at near record levels for this time of the year, the
market appears to lack an economic basis to sustain such a rally in futures
prices. Prices for September delivery were generally lower than the prevailing
cash price during the week by 6 cents. The slight backwardation in near-month
prices, however, seems more than offset by the substantial differentials between
cash and winter month contracts.As of
Friday, prices for December and January delivery exceeded the Henry Hub spot
price by $0.636 and $0.765 per million Btu, respectively, providing a clear
incentive for continued additions into storage.
Spot Prices ($ per MMBTU)-Selected
Trading Centers |
Mon. 8/06 |
Tues. 8/07 |
Wed. 8/08 |
Thur. 8/09 |
Fri.8/10 |
Henry Hub |
3.06 |
3.14 |
3.09 |
3.09 |
2.98 |
New York citygates |
3.64 |
4.05 |
4.14 |
3.78 |
3.28 |
Chicago citygates |
3.06 |
3.18 |
3.16 |
3.12 |
2.97 |
Northern CA PG&E |
3.38 |
3.40 |
3.24 |
3.20 |
2.96 |
Southern CA (SOCAL) |
3.64 |
3.65 |
3.47 |
3.33 |
3.10 |
Futures (Daily
Settlement, $MMBTU) |
|
|
|
|
|
SeptemberDelivery |
3.027 |
2.971 |
3.036 |
2.956 |
3.040 |
October Delivery |
3.065 |
3.012 |
3.074 |
2.993 |
3.076 |
Source: Financial Times
Energy, Gas Daily |
Storage:
Net injections into storage were 80 Bcf for the week
ended August 3, as estimated by the American Gas Association (AGA), bringing
total inventories as of that date to an EIA-estimated 2,342 Bcf—the third
largest level since 1995 for this point in the year (See
Storage Figure). Net injections were the second highest since 1995
during this week of the refill season in both the East region and the nation as
a whole, and were the highest in the West region in the 8-year history of the
AGA storage data series.EIA's most
current estimate for end-of-July inventories, incorporating AGA's August 3
report, is 2,308 Bcf. If net injections in the months of August through October
match the 6-year averages, total stocks as of November 1 will be approximately
3,070 Bcf.However, cumulative net
injections during the first 4 months of the refill season (April-July) have
exceeded the 6-year average by about 52 percent. If net injections during
August-October continue to exceed their averages by a similar margin, total
stocks on November 1 will exceed 3,450 Bcf. The largest
beginning-of-heating-season level ever recorded by EIA was 3,467 Bcf in 1990.
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EIA lowered its forecast for wellhead prices to
$3.10 per million Btu for the third quarter of 2001 and $3.50 per million Btu
for the fourth quarter of 2001 in the most recent issue of the Short-Term Energy Outlook released on Wednesday.With these reduced estimates, prices are expected to decline over
12 percent in the third quarter of 2001 and almost 26 percent in the fourth
quarter of 2001 compared with 2000.The
lower prices are due in part to expectations of flat natural gas demand in the
second half of 2001, along with expanded supply.Supply is projected to expand strongly, with roughly 3 percent
growth in the third quarter and over 5 percent in the fourth quarter.The reduced growth in demand is partly
attributed to lower industrial demand.Given the relatively low prices and abundant supplies this summer, EIA
projects that the robust pace of net storage injections should continue through
the end of the refill season, which will provide needed supplies next
winter.
Summary:
Sufficient supplies and net working gas injections
within the range of expectations combined to provide stability to natural gas
prices despite the extraordinarily high temperatures that prevailed throughout
much of the country.Prices at the
Henry Hub finished over 2 percent lower than the previous week, while prices for
the near-month futures contract finished slightly over 2 percent higher.
[jt11]Same comment as before.