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Overview: Tuesday February, 19, 2002

Spot prices at many market locations finished the week on Friday, February 15 with sharp decreases that reversed most of the gains from earlier in the week.  The  price at the Henry Hub was $2.18, a decline of 2 cents per MMBtu compared with the previous Friday.  On the NYMEX, the price of the futures contract for March delivery at the Henry Hub settled at $2.206 per MMBtu, roughly 2 cents greater than  the previous Friday.  A trend towards cooling temperatures across most of the country may have contributed to the rally in prices early in the week. (See Temperature Map) (See Deviation Map)  However, expectations of warmer temperatures early this week and lighter demand over the holiday weekend along with unusually high storage levels likely reversed the price rally.  The spot price for West Texas Intermediate (WTI) crude oil increased by roughly 6 percent, climbing to $21.47 per barrel or $3.70 per MMBtu.

 


 


Prices:

In a week of heightened variability, spot prices gained between 15 and 51 cents per MMBtu early in the week, before declining beginning at mid-week.  Expectations of mild temperatures next week and light demand heading into the holiday weekend resulted in price declines of up to 13 cents on Friday at market locations across the country.  Despite the relatively large price movements during the week, prices generally ended the week only slightly changed from the previous Friday.  Spot prices at the New York citygate exhibited the most variability climbing 51 cents to peak at $3.10 per MMBtu on Tuesday before declining throughout the remainder of the week to close at $2.56 on Friday, February 15, 4 cents above the previous Friday.  When adjusted for inflation, prices at the selected market locations in the table have remained close to the monthly 2-year average from 1998 through 1999 (prior to the price spikes of 2000-2001) in each month of the current heating season. 

 

At the NYMEX, the settlement price of the futures contract for March delivery at the Henry Hub also climbed early in the week, peaking on Tuesday, February 12 at $2.305, before declining to end the week at $2.206 per MMBtu, just $0.015 or  less than 1 percent greater than the previous Friday.  The settlement price of the March contract varied in a fairly tight range of only about  plus or minus 5 cents per MMBtu. 

 

Spot Prices ($ per MMBtu)

Mon.

Tues.

Wed.

Thurs.

Fri.

11-Feb

12-Feb

13-Feb

14-Feb

15-Feb

Henry Hub

2.21

2.39

2.37

2.27

2.18

New York citygates

2.59

3.10

3.04

2.59

2.56

Chicago citygate

2.20

2.40

2.34

2.25

2.17

PG&E citygate

2.25

2.46

2.40

2.34

2.27

So. Cal. Border Avg.

2.20

2.37

2.36

2.26

2.19

Futures ($/MMBtu)

 

 

 

 

 

March delivery

2.286

2.305

2.245

2.186

2.206

April delivery

2.345

2.369

2.310

2.246

2.257

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

 

Storage:

The total net withdrawal from storage for the week ended Friday, February 8 was an estimated 156 Bcf, according to the American Gas Association (AGA).  This is the second largest weekly stock draw thus far this heating season, behind the 190 Bcf withdrawn during the first week of this year.  The high drawdown occurred during a week in which gas-weighted heating degree days exceeded normal for the week by up to 10 percent in four of nine Census Divisions according to National Weather Service data.  This drawdown exceeded this week’s average over the previous 5 years (1997-2001) by 67 percent, although, over the 9-year span of AGA data, it is exactly in the middle, with four larger and four smaller withdrawals during this week.  The estimated withdrawals in all three regions exceeded their respective 5-year averages by significant amounts:  by about 43 percent in the East and 53 percent in the West.  Withdrawals of 44 Bcf in the Producing region were nearly three times the 5-year average of 16 Bcf and the third highest for this region over the 9 years of AGA data.  As of February 8, estimated cumulative net withdrawals for the heating season passed 1 Tcf, a milestone usually reached from two to six weeks earlier in the season.  Total stocks as of February 8 stood at an EIA-estimated 2,132 Bcf–nearly 37 percent above the 5-year average.

(See Storage Figure)

 

All Volumes in Bcf

Current Stocks (Fri, 2/8)

Estimated Prior 5-Year (1997-2001) Average

Percent Difference from 5 Year Average

Net Change from Last Week

One-Week Prior Stocks (Fri, 2/1)

East Region

1,224

929

32%

-97

1,321

West Region

256

215

19%

-15

271

Producing Region

652

416

57%

-44

696

Total Lower 48

2,132

1,560

37%

-156

2,288

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 Successor to “EnronOnline” Initiates Activity.  On Monday, February 11, UBS Warburg Energy announced the launch of its incarnation of EnronOnline, called UBSWenergy.com.  UBS Warburg, the investment-banking group of UBS AG, one of the largest financial services firms in the world, was the successful bidder for the exclusive rights to the technology that drove Enron’s North American wholesale electricity and natural gas trading unit.  That technology, together with reportedly over 600 former Enron employees–including the former President and Chief Operating Officer–who built Enron’s trading operation into the industry leader, now comprise the core of UBS Warburg Energy.  UBS Warburg Energy hopes to build a successful trading operation, in part by recapturing trading business lost by Enron to other trading platforms.  On balance, Enron’s demise has had few apparent negative consequences to date on natural gas market performance.  However, an additional trading exchange would likely support added competition and liquidity in wholesale trading.     

 

Producer Price Indexes─January 2002.  The Bureau of Labor Statistics just released its latest Producer Price Index (PPI) estimates on Friday, February 15, which show either price increases or slower decline rates for natural gas prices at various stages from production to end-use consumption. At the upstream stage of “Crude Materials for Further Processing,” the PPI (unadjusted) for natural gas increased by 4.9 percent in January–a sharp reversal from the 24.7 percent decrease recorded in December 2001. For the overall category of  “Intermediate energy goods,” price index movements were varied.  In this category, the PPI (seasonally adjusted, unless otherwise stated) for natural gas to electric utilities dropped 0.9 percent in January after falling 4.8 percent in December.  Also in this category, the PPI for industrial natural gas use actually rose by 2.7 percent in January,  after a 4.0 percent decline in December. Finally, in the category of “Finished Consumer Goods Excluding Foods,” residential gas increased by 1.7 percent in January, after dropping 3.2 percent in December.

 

Summary:

Spot prices generally finished the week on Friday, February 15, with only small changes from the previous Friday.  On the NYMEX, the settlement price of the futures contract for March delivery at the Henry Hub settled at $2.206 per MMBtu, roughly 2 cents greater than the previous Friday.  Net withdrawals of natural gas from storage were 156 Bcf for the week ended February 8 in response to larger-than-normal heating demand.

 

 

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