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Overview:Monday, January 07, 2002

The spot price at the Henry Hub finished the trading week on January 4 at $2.36 per MMBtu, roughly 30 cents or over 11 percent less than on the previous Friday.On the NYMEX, the settlement price of the futures contract for February delivery at the Henry Hub settled at $2.275 per MMBtu, down nearly 50 cents from the previous Friday.Market prices were affected early in the week by colder temperatures in most of the eastern two-thirds of the United States.(See Temperature Map) (See Deviation Map)Although again smaller than historical averages and market expectations, withdrawals from storage at 124 Bcf were the largest reported so far during the current heating season. The spot price for West Texas Intermediate (WTI) crude oil increased by over 1 percent, climbing to $21.47 per barrel or $3.70 per MMBtu.

 

 

Prices:

Spot prices at most major market locations began the week higher on Monday, December 31 than the previous Friday, but declined in each trading day last week after the market reopened on Wednesday, January 2.Wintry weather that enveloped much of the eastern two-thirds of the country contributed to price increasesbetween 5 and 20 cents per MMBtu on Monday, December 31.The higher spot prices resulted in the Henry Hub spot price exceeding the settlement price of the futures contract for February delivery.Theamount by which the spot price exceeded the February delivery price ranged from 10.5 to 23.3 cents per MMBtu last week until decreasing to under 9 cents on Friday.This price pattern suggests that market participants expect prices to decline over the rest of the winter, because supplies remain quite substantial, with more than 600 Bcf in storage above the normal level for this time of year.On Wednesday, January 2, the first day of trading in the New Year, spot prices declined by 15 to 30 cents per MMBtu at nearly all major market locations, more than offsetting the 5- to 20-cent rise on Monday.Prices declined the rest of the week, reaching the levels that prevailed in December before the holidays and the ensuing wintry weather.†† If storage continues to dominate market pricing, prices are likely to remain relatively low throughout the remainder of the winter.

 

At the NYMEX, the settlement price of the futures contract for February delivery declined throughout the week from the $2.774 per MMBtu recorded on Friday, December 28.Short selling the February and March delivery contracts appears to have been the predominant feature of the futures market last week as traders appear to be expecting prices to decline.Thisput downward pressure on the settlement prices of the futures contracts for delivery in February and March.Although the net storage withdrawal reported for the week ended December 28 was the closest to normal yet this season, prices fell on Thursday, January 3, and ended the week nearly 50 cents lower than on the previous Friday.

 

Spot Prices ($ per MMBtu)

Mon. 12/31

Tues. 1/01

Wed. 1/02

Thurs. 1/03

Fri. 1/04

Henry Hub

2.75

2.75

2.57

2.50

2.36

New York citygates

4.93

4.93

4.88

4.48

3.17

Chicago citygate

2.71

2.71

2.50

2.42

2.31

PG&E citygate

2.66

2.66

2.42

2.36

2.22

So. Cal. Border Avg.

2.60

2.60

2.37

2.34

2.22

Futures ($/MMBtu)

 

 

 

 

 

February delivery

2.570

holiday

2.465

2.268

2.275

March delivery

2.560

holiday

2.441

2.263

2.265

Source: NGI's Daily Gas Price Index (http://intelligencepress.com)

 

Storage:

Net storage withdrawals were 124 Bcf for the week ended Friday, December 28, according to the American Gas Association (AGA).This is 17 percent less than the 6-year (1995-2000) average of net withdrawals for this week.As of December 28, the EIA-estimated balance of 2,903 Bcf in inventories is 26.4 percent above the EIA 6-year average for this point in the year, and over 1,100 Bcf greater than at this time last year.Net withdrawals in each of the three regions were significantly less than their respective 6-year averages, causing the surplus with respect to their average inventory levels to grow for the ninth consecutive week in the East and Producing regions and in the nation as a whole.With a net withdrawal that was 23 percent less than average, Producing region stocks stood at over one and one-half times their 6-year average. (See Storage Figure)

 

All Volumes in BCF

Current Stocks (Fri,12/28)

Estimated 6-Year (1995-2000) Average*

Percent Difference from 6 Year Average

Net Change from Last Week

One-Week Prior Stocks (Fri,12/21)

East Region

1,699

1,414

20.2%

-84

1,783

West Region

334

304

10.0%

-12

346

Producing Region

869

578

50.4%

-28

897

Total Lower 48

2,903

2,296

26.4%

-124

3,027

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 revisions to EIA monthly survey data for various months in 1999-2000.

 

Other Market Trends:

The Energy Information Administration has updated its web site regarding the status of retail competition for residential natural gas consumers in each state as of December 2001 (http://www.eia.doe.gov/oil_gas/natural_gas/restructure/restructure.html). Californiaís energy crisis and the record high gas prices last winter have slowed the move toward increased competition in retail natural gas markets. In fact, some states have chosen not to expand pilot program or have deferred legislative action until new questions concerning reliability and costs can be resolved. Still, as of December 2001, 20 states and the District of Columbia have programs underway that allow residential consumers and other small‑volume gas users to purchase natural gas from someone other than their traditional utility company. Five states and D.C. allow all residential consumers to choose their natural gas suppliers, but a lack of marketer participation has precluded the development of competitive retail markets in two of these states. Seven other states have begun to implement statewide programs, and eight states have pilot or partial unbundling programs in place. An additional 10 states are considering action on customer choice. The states with the largest number of participants in customer choice programs are Georgia (1,375,550), Ohio (825,148), Pennsylvania (253,734), and New York (244,823).

 

Summary:

After an increase on Monday, the Henry Hub spot price declined throughout the remainder of the week, and closed at $2.36 per MMBtu on Friday, January 4, down 30 cents from the previous Friday.The price of the futures contract for February delivery at the Henry Hub settled at $2.75 per million Btu on Friday, nearly 50 cents less than the previous Friday.At 124 Bcf, withdrawals from storage were again small relative to historical averages, and working gas in storage remains more than 1,100 Bcf above last yearís level.

 

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