for week ending December 2, 2001 | Release date: December 3, 2001 | Previous weeks
Spot prices at the Henry Hub
remain low for this time of year, as prices declined 16 cents from
Friday-to-Friday. The spot price rose
$0.50 per MMBtu from Monday to Wednesday, and then fell almost 60 cents by
Friday to trade for $1.77 at the end of the week. Concern about the final
resolution of the surprising decline of the Enron Corporation appears to be
contributing to the price variability on the spot market. On the NYMEX futures market the December
contract closed on Wednesday at $2.316 per MMBtu, more than $1.00 below what it
began trading for as the near-month contract in late October. The unseasonably
warm temperatures that have dominated the weather in much of the country
continued last week in the eastern portion of the country. (Temperature Map) (Temperature Deviation Map). In addition, the National Weather Service's (NWS)
latest 6 to 10 day forecast is calling for a warm weather pattern to continue into early December.
Because of the combination of warmer-than-normal temperatures and favorable
prices, this year's refill season has continued into the 2nd half of
November with an estimated 12 Bcf added to working gas stocks during the third
week of last month. The spot price of West Texas Intermediate (WTI) crude oil
moved up about $0.85 per barrel on Friday and ended the week at $19.50 or about
$3.36 per MMBtu.
Prices:
Spot
prices over the past 2 weeks have displayed some of the widest daily price
swings in several months. Some of the
factors contributing to this price variability include: the continued increase
in working gas stocks, weak demand resulting from the slowing of the U.S.
economy, the lack of significant weather-related demand, and the decline in the
prices of petroleum products. Prices at most major market locations surged in
the first half of last week, then dropped sharply as the lack of demand kept
the volume of natural gas available in most pipeline systems at a high level.
Transco issued its first operational flow order (OFO) ever due to excessive
linepack, while other major interstate transmission systems that serve the
eastern parts of the country also issued warnings of possible oversupply OFOs
to their customers late last week. Between Wednesday and Friday the spot price
at many major Gulf Coast markets dropped by $0.60 per MMBtu or more as most
markets ended the week with prices well below $2.00. However, colder
temperatures in the western half of the country limited end-of-week declines in
many trading locations, resulting in net price gains from the end of the prior
week. Friday-to-Friday increases ranged from 12 to 55 cents per MMBtu in the Rockies
and around 7 to 33 cents in the Permian and San Juan basins, with increases at
Midcontinent locations slightly less. In
California, prices on the PG&E system increased $0.36 to $1.90 per MMBtu,
while the average price at the Southern California border climbed $0.64 to
$2.19.
Futures
market prices on the NYMEX have been in a general decline for almost a
month. Although prices for the new
near-month contract (January delivery) gained 14 cents per MMBtu on Friday to
end the week at $2.701, market observers indicated that this upward movement
was likely due in large part to the need for several large traders to cover the
short positions they held. This shift is expected to be reversed on Monday, and
even with Friday's gain, prices for all forward month contracts through October
of next year remained below $3.00 per MMBtu. The contracts for the other
remaining months of the current heating season (February and March) ended
Friday's trading at $2.786 and $2.799, respectively. Last year at this time prices
of these winter season contracts ranged between $6.673 per MMBtu for January
and $6.043 for March.
Spot Prices ($ per MMBTU)-Selected
Trading Centers |
Mon. 11/26 |
Tues. 11/27 |
Wed. 11/28 |
Thur. 11/29 |
Fri. 11/30 |
Henry Hub |
1.84 |
1.88 |
2.32 |
2.19 |
1.77 |
New York citygates |
2.06 |
2.20 |
2.92 |
2.66 |
2.07 |
Chicago citygates |
1.93 |
2.20 |
2.48 |
2.35 |
1.86 |
PG&E Citygates |
2.26 |
2.61 |
2.90 |
2.82 |
2.44 |
Southern California
Bdr. Average |
2.17 |
2.46 |
2.66 |
2.56 |
2.19 |
Futures (Daily
Settlement, $MMBTU) |
|
|
|
|
|
December Delivery |
2.696 |
2.606 |
2.316 |
Expired |
Expired |
January Delivery |
2.935 |
2.951 |
2.732 |
2.561 |
2.701 |
February Delivery |
|
|
|
2.672 |
2.786 |
Source: Natural
Gas Intelligence |
Storage:
The industry continued to add to overall stock
levels in the third week of November as net injections totaled 12 Bcf for the
week ended Friday, November 23, according to the latest American Gas
Association (AGA) weekly estimate. Last year net withdrawals during the first
23 days of November totaled almost 200 Bcf
compared with this year's buildup of 47 Bcf during the same period. With last
week's additions, working gas stock levels stood at an EIA-estimated 3,156 Bcf,
which is 25 percent, or more than 600 Bcf,
higher than last year's level. Attractive spot and futures prices and the unseasonably warm
temperatures that dominated much of the country in November have contributed
greatly to the sustained stock build that has added a record of more than 2,400
Bcf since early April. Urban areas in the Midwest and the East have seen
heating-degree-day declines from normal of between 16 and 34 percent since late
October and the National Weather Service (NWS) has forecasted that warmer
weather will continue into the first 12 days of December. If this weather forecast proves accurate and
prices remain low, firms with access to remaining storage capacity may continue
to add to storage levels. The last time the industry continued to build stocks
in late November and early December was during the mild winter of 1998-99. (Storage Figure)
All Volumes
in BCF |
Current
Stocks (Fri,11/23) |
Estimated 6-Year
(1995-2000) Average |
Percent
Difference from 6 Year Average |
Net Change
from Last Week |
One-Week
Prior Stocks (Fri,11/16)* |
|
East Region |
1,851 |
1,728 |
7.1% |
-4 |
1,855 |
|
West Region |
401 |
354 |
13.2% |
3 |
398 |
|
Producing Region |
904 |
719 |
25.7% |
13 |
891 |
|
Total Lower 48 |
3,156 |
2,801 |
12.7% |
12 |
3,144 |
|
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 September 2001. |
||||||
Other Market Developments:
Enron Corporation suspended its Internet energy
trading system last week. It also was
removed from the list of companies comprising the S&P 500, and on Friday,
November 30, its stock price fell to $0.25 per share (from a high of almost $90
earlier in 2001). With a proposed merger
with Dynegy Corp. suspended indefinitely, the company filed for bankruptcy on
Sunday, December 2. Until recently, Enron was the nation's largest natural gas
and electricity trader. According to the Wall Street Journal, some industry
analysts have estimated that Enron was once involved in as much as 20 percent
of daily trade in the markets for these energy commodities.
Summary:
After an early surge, prices at most major spot
markets dropped sharply by the end of last week as weak demand continues. The
industry continued to build stocks into the 2nd half of November,
and a record 2,400 Bcf of working gas has been added to storage since the end
of March. Futures prices remain well below $3.00 per MMBtu for all forward
months through October 2002.