Overview:  Tuesday, September 4, 2001

Prices in most major markets continued generally downward last week, spurred by relatively mild temperatures throughout much of the country and more than adequate supplies as indicated by reports of another strong storage refill rate for the prior week. (See Temperature Map) (See Deviation from Normal Temperatures Map) The spot market price at the Henry Hub in Louisiana ended the week down 62 cents at $2.15 per MMBtu.  On the NYMEX futures market, the contract for September delivery at the Henry Hub expired on Wednesday at $2.295 per MMBtu, compared with almost $4.62 a year ago.  The contract for delivery in October ended the week at $2.38.  The spot price for West Texas Intermediate (WTI) crude oil ended the week down at $27.25 per barrel ($4.70 per MMBtu), a decline of $1.05 per barrel from the prior week.

 

 

 

Prices: 

Spot prices at major market locations such as Southern California (SoCal), Northern California (PG&E), New York, Chicago and the Henry Hub gradually declined each day throughout the week in a range of about 3 to 16 cents per million Btu through Wednesday, August 29.  However, on Thursday prices held fairly steady in a range of 2 cents per million Btu as concerns over the possibility of a new tropical system slowed the downward momentum of prices.  However, the system quickly dissipated, and prices resumed their downward path on Friday.  Spot prices fell below the $2.50 mark at most of the major market locations with the notable exception of  Florida, which traded at $2.79. Spot prices  were below $2.00 at several upstream markets including Texas, Oklahoma, New Mexico and the Rockies.  At the Henry Hub, spot prices fell to $2.15, the lowest level since January 4, 2000, when the spot price was just under $2.15 per million Btu.  With moderate temperatures and sufficient supplies, prices are not expected to return to higher levels soon.

 

At the NYMEX, the price of the September futures contract for delivery at the Henry Hub expired on Wednesday, August 29, at $2.295 per million Btu after dropping a little over 50 cents from the previous Friday price.    This final settlement price represents the lowest final price for next month delivery since January 13, 2000, when the February contract settled at $2.32. It is also the lowest settlement price for the September contract in over 2 years.   The futures contract for October delivery closed on Friday, August 24, at $2.736 per MMBtu.  Like the spot price at the Henry Hub, its price declined gradually throughout the week through Wednesday, and held fairly steady on Thursday before declining again on Friday.  Although the market exhibited some backwardation through October with prices for future delivery below current cash prices for most of the week, the prices for delivery in January and February exceed $3.00 per million Btu.  This should provide sufficient incentive for the market to continue its robust injections into storage.

 

Spot Prices ($ per MMBTU)-Selected Trading Centers	Mon. 8/27	Tues. 8/28	Wed. 8/29	Thur. 8/30	Fri.   8/31
Henry Hub	2.59	2.56	2.45	2.46	2.15
New York citygates	2.90	2.84	2.77	2.75	2.35
Chicago citygates	2.59	2.54	2.44	2.46	2.16
Northern CA PG&E	2.76	2.69	2.55	2.55	2.12
Southern CA (SOCAL)	2.89	2.75	2.60	2.58	2.16
Futures (Daily Settlement, $MMBTU)
September  Delivery	2.544	2.415	2.295	2.395	2.380
October Delivery	2.582	2.443	2.393	2.720	2.710
Source: Financial Times Energy, Gas Daily

 

Storage:

A net total of 76 Bcf was injected into storage during the week ended August 24, according to the American Gas Association (AGA).  Net injections for the total United States and the West region were the second highest for this week in the 8-year span of AGA estimates.  Net injections of 55 Bcf in the East region were 10 percent greater than the 6-year average for the week (See Storage Figure).  Net injections in the Producing region were slightly below the 6-year average of AGA estimates for the week, marking only the second time this refill season that this region’s weekly net injections have not exceeded the average.  With still another week of net injections to account for in August, cumulative net injections through the 24^th for the total United States of 246 Bcf are very close to eclipsing EIA’s 6-year average of 261 Bcf  for the entire month.  Cumulative net injections thus far in the West region are over three times the 6-year average for the month (39 Bcf vs. 12 Bcf).

 

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All Volumes in BCF Current Stocks (Fri,8/24) Estimated 6-Year (1995-2000) Average Percent Difference from 6 Year Average Net Change from Last Week One-Week Prior Stocks (Fri,8/17)* East Region 1,463 1,449 1.0% 55 1,408 West Region 354 321 10.3% 9 345 Producing Region 714 604 18.2% 12 702 Total Lower 48 2,531 2,374 6.6% 76 2,455 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 June 2001.

 

Summary: 

Prices in both the spot and the NYMEX futures market continued to decline throughout most of the week.  A strong supply situation as evidenced by a strong injection report and moderate temperatures in much of the country combined to drive down prices.  The NYMEX futures contract for delivery in September closed over $1.50, or almost 40 percent, lower than its final settlement price last year.