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Overview: Monday, November 26, 2001 The spot price at the Henry
Hub finished the abbreviated trading week on Wednesday, November 21 at $1.91
per MMBtu, roughly 22 cents or 13 percent over the previous Friday. On the NYMEX, the settlement price of the
futures contract for December delivery at the Henry Hub settled at $2.813 per
MMBtu, up roughly 18 cents over the previous Friday. Market prices were affected early in the week by the expectation
of colder weather , and then on Wednesday–the end of trading for the week–by
mild temperatures that prevailed throughout much of the country. (Temperature Map) (Temperature Deviation Map) The spot price for West
Texas Intermediate (WTI) crude oil increased by nearly 2 percent, climbing to
$18.38 per barrel or $3.17 per MMBtu. Prices: Spot prices at many locations
throughout the country climbed early in the week as seasonal temperatures
appeared in parts of the Midwest and Northeast for several days early in the
week. Prices rose at every market
location throughout the country, with increases on Monday ranging from 30 to 65
cents per MMBtu at most points. On
Tuesday, the increases continued, mostly in the range of 40-65 cents, resulting
in cumulative gains of $1 per MMBtu or more at over 50 percent of pricing
locations in all markets, with the two-day increases equaling or exceeding the
cumulative declines of the previous week.
Mild temperatures and light demand reversed much of the increase in spot
prices as trading for the week ended early heading into the holiday weekend,
however, prices finished the week up at many market locations. The spot price
at the Henry Hub climbed to $2.55 per MMBtu on Tuesday, and finished the week
at $1.91 per MMBtu, roughly 18 cents or 13 percent over the previous
Friday. Despite the increases last
week, spot prices at the Henry Hub remained at levels closely approximating the
prices for the same report week in 1999, and were about 70 percent below the
prices that prevailed last year at this time. At the NYMEX, the settlement
price of the futures contract for December delivery at the Henry Hub also
climbed early in the week before declining on Wednesday to end the week at
$2.813 per MMBtu, up almost 18 cents or 7 percent over the previous
Friday. In contrast to the Henry Hub
spot price, which varied in a range of about $1.17 per MMBtu during the
shortened week, the settlement price of the December contract varied in a tight
range of only about 22 cents per MMBtu.
On Wednesday, the settlement price for the December contract declined
only about 5 cents despite the report of net injections for the week ended
November 16, and the upward revision to the net injections reported in the
storage report of the previous week. This
uncharacteristic unresponsiveness of the settlement price to a bearish storage
report tends to indicate that the market does not expect the current level of
spot prices to continue throughout next month.
The contract for December delivery expires on Wednesday, November
28.
Storage: Net injections into working gas storage were 15
billion cubic feet (Bcf) during the week ended Friday, November 16, according
to the most recent American Gas Association (AGA) estimates. This is the first time in the 8-year history
of AGA weekly data collection that total net additions occurred during this
week, and it stands in marked contrast to the 94 Bcf drawdown this time last
year. In addition, the AGA revised its storage estimates upward for the prior
week (ended Friday, November 9), reporting that the Consuming East region had
net injections of 10 Bcf instead of zero, which increased the total net
injections for that week from 7 to 17 Bcf.
Estimated cumulative additions through November 16, 2001, were 35 Bcf,
while severe cold temperatures last year resulted in a net withdrawal of 71 Bcf
during the first 16 days of November 2000.
The continued addition of gas to storage despite the start of the
heating season brings working gas levels as of November 16, 2001, to an
estimated 3,136 Bcf, which exceeds the volume in storage at this time last year
by more than 500 Bcf. (Storage Figure) Working gas
inventories by region as of November 16 exceeded normal levels by up to 21.3
percent, while total inventories were over 10 percent above normal for the
first time this year.
Other Market Trends:
Winter weather outlook. In the November 15 update to its Winter Outlook 2001-2002,
the National Weather Service (NWS) reiterated its forecast for a repeat of last
winter. The forecast, covering the
period from December 2001 through February 2002, continues to call for
colder-than-normal temperatures throughout most of the northern one-third of
the country, despite the unusually warm weather experienced thus far in
November, which sharply contrasts with the early-winter frigid temperatures
during November 2000. Through November
24, heating-degree days for the nation as a whole were 22 percent less than for
the same period last year. Cumulative
heating-degree days for all Census Divisions through November 24 ranged from 7
to 40 percent lower than last year at this time. Of the nine Census Divisions, only the South Atlantic had
experienced colder-than-normal temperatures through November 24. Nonetheless, the NWS’s revised Winter
Outlook still foresees a winter with sharp swings in temperature and
precipitation, with heavy lake-effect snows in the Midwest and Northeast, cold
snaps in the South, and potential for Nor’easters along the East Coast.
Gas drilling activity. Rigs drilling for natural gas
numbered 814 according to the Baker-Hughes rig count report released on
Wednesday, November 21. This is a decline of 6 rigs, or roughly 1 percent from
the prior week. Since reaching its record-setting peak of 1,068 rigs during the
week ended July 13, 2001, rigs drilling for gas have declined at an average
weekly rate of roughly 1.3 percent. As a result of this steady decline in rig
counts, during the week ended November 9, the number of rigs drilling for
natural gas slipped below the level recorded during the same report week in the
previous year for the first time since September 1999. Rig counts have remained below this
threshold for three straight weeks. The
rig count is almost 1 percent below the level recorded during the same week
last year, and a little over 2 percent below the average number of gas rigs
since 2000. Natural gas supplies are
expected to be more than adequate for the upcoming winter, however; continued
declines in drilling for natural gas prospects could jeopardize gas supplies in
the longer-term. Summary: Spot
prices ended the abbreviated holiday week on Wednesday up over the previous
Friday in a week marked by significant variability. Nevertheless, spot prices were almost 70 percent lower than last
year at this time, closely approximating the levels that prevailed during
November 1999. On the NYMEX, the
settlement price of the futures contract for December delivery also climbed
during the week. As of the Thanksgiving
weekend, the storage report has yet to show a week with a net withdrawal during
the current heating season. Rig counts
continued to decline, and are now below the average number of rigs since
2000. The futures contract for December
delivery is scheduled to expire on Wednesday, November 28. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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