for week ending March 24, 2002 | Release date: March 25, 2002 | Previous weeks
After moving down at
mid-week, spot prices at most major market locations rebounded and climbed to
levels not seen in over 6 months. At the Henry Hub prices gained $0.35 on
Friday to end the week at $3.54 per MMBtu, the highest reported daily mid-point
price since June 25, 2001. On the NYMEX the futures contract for April delivery
ended trading on Friday at $3.326 per MMBtu. This is $0.90 per MMBtu higher or
37 percent above its settlement price when it began to trade as the near-month
contract on February 27. Much of the country had cooler-than-normal
temperatures last week, especially in the Northern Plains and the Northeast. (See Temperature Map) (See Deviation Map). The spot price of West
Texas Intermediate (WTI) crude oil continued to climb, exceeding $25 most days
last week, and ended trading on Friday at $25.56 or $4.40 per MMBtu.
Prices:
In a week that displayed
considerable variability, prices ended trading at a higher level than the
previous Friday for the fifth consecutive week. Between February 15 and March 22, the Henry Hub spot price has
increased from $2.18 per MMBtu to $3.54, a gain of more than 60 percent.
Factors contributing to this recent resurgence in spot prices include low temperatures
in the northern tier and in much of the eastern two thirds of the country,
expectations of higher prices through the rest of the year, and the more than
25 percent rise in the price of crude oil in the past 4 weeks. Major citygate
prices all moved up sharply in Friday's trading. The Chicago citygate traded at
a price of $3.69 per MMBtu for a gain of $0.39 for the day, while prices at
most Northeast citygate markets climbed between $0.20 and $0.40 per MMBtu. Prices in Transco Zone 6 for New York
delivery increased 7 cents on Friday after gaining almost $0.65 during the
prior 4 days of trading and ended the week at $3.99. Prices at California
markets reached their highest levels since mid August 2001, trading between
$3.53 and $3.60 as a reported shut down of a unit at the state's PaloVerde
nuclear plant contributed to increased demand at natural gas generating
facilities.
At the NYMEX, the near-month
contract for April delivery declined more than 10 cents on Friday, after moving
up almost $0.32 per MMBtu during Thursday's trading, to end the week at $3.326.
For the week the April contract gained $0.25 from the previous Friday's
settlement and this followed the previous week's almost $0.45 gain. Despite the recent increases in the April
contract, which closes tomorrow (3/26/02), it appears likely that it will conclude
trading more than 30 percent below last year's April contract's expiry price of
$5.384.
Spot Prices ($ per MMBtu) |
Mon. |
Tues. |
Wed. |
Thurs. |
Fri. |
18-Mar |
19-Mar |
20-Mar |
21-Mar |
22-Mar |
|
Henry Hub |
3.16 |
3.33 |
3.30 |
3.19 |
3.54 |
New York citygates |
3.54 |
3.72 |
3.72 |
3.92 |
3.99 |
Chicago citygate |
3.26 |
3.41 |
3.38 |
3.30 |
3.69 |
PG&E citygate |
3.39 |
3.50 |
3.38 |
3.27 |
3.60 |
So. Cal. Border Avg. |
3.26 |
3.39 |
3.26 |
3.18 |
3.53 |
Futures ($/MMBtu) |
|
|
|
|
|
April delivery |
3.305 |
3.256 |
3.111 |
3.431 |
3.326 |
May delivery |
3.343 |
3.294 |
3.149 |
3.466 |
3.356 |
Source: NGI's
Daily Gas Price Index (http://intelligencepress.com) |
Storage:
Net withdrawals from storage were 50 Bcf for the
week ended Friday, March 15 according to the American Gas Association. Following two consecutive weeks in which net
withdrawals were well over 100 Bcf and twice as high as the 5-year average for
these weeks, withdrawals were nearly 31 percent below the week's 5-year average
of 72 Bcf. Lighter-than-normal heating
load likely accounted for the relatively small drawdown of stocks as
temperatures were warmer than normal in most parts of the country. Gas-weighted heating degree days (HDDs) were
9 percent below normal in the Lower 48 States, with HDDs up to 27 percent below
normal in some regions of the country for the week ended Saturday, March
16. In New England, HDDs were over 14
percent below normal while net withdrawals in the East region were over 22
percent below normal. In contrast, the
West region had net withdrawals of 9 Bcf, more than double its 5-year average,
as HDDs ranged from 2 to 15 percent above normal in the Pacific and Rocky
Mountain states. For the first time
since early December 2001, the Producing region increased its stocks of working
gas in storage, reporting net injections of 2 Bcf. Total working gas stocks remain nearly 900 Bcf more than
year-earlier levels. (See Storage Figure)
All Volumes
in Bcf |
Current
Stocks (Fri,3/15) |
Estimated
Prior 5-Year (1997-2001) Average |
Percent
Difference from 5 Year Average |
Net Change
from Last Week |
One-Week
Prior Stocks (Fri, 3/8) |
East Region |
876 |
656 |
34% |
-43 |
919 |
West Region |
241 |
180 |
34% |
-9 |
250 |
Producing
Region |
569 |
368 |
55% |
2 |
567 |
Total Lower
48 |
1,686 |
1,203 |
40% |
-50 |
1,736 |
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. |
Other Market Trends:
Offshore Leasing. The U. S. Department of the Interior's Minerals Management
Service (MMS) held a sale of offshore oil and natural gas leases in the Central
Gulf of Mexico on March 20, which attracted $363 million in high bids from 77
companies. The total of all bids was
$442 million. Lease Sale 182 offered
4,446 tracts offshore Alabama, Louisiana, and Mississippi; the MMS received 697
bids on 506 tracts. Tracts in less than
200 meters of water attracted much of the bidding, with 288 tracts receiving
405 bids, which amounts to 57 percent of the sale. Interest also was strong in waters beyond the shallow
depths. MMS Director Johnnie Burton
said independent companies and majors were "obviously encouraged by MMS's
newest incentive of royalty relief for deep gas." Under the incentive, the first 20 Bcf of gas
production from 15,000 feet or greater is royalty free. Approximately 31 percent of the tracts
receiving bids were in ultra-deep water (more than 800 meters or approximately
2,625 feet). The deepest tract bid on was Atwater Valley, Block 347 in 2,665
meters of water (approximately 8,610 feet). The high bid on each block will go through an evaluation process to
ensure the public receives fair market value before a lease is awarded.
FERC Issues Capacity Release Order. The Federal Energy Regulatory
Commission issued Order 587-N on March 11, 2002, which gives shippers greater
ability to recall released capacity from replacement shippers by allowing
recalls for next-day and same-day flows. The intent of the rule is to provide
more flexibility to holders of firm capacity and to free up capacity that most
likely would not be released unless shippers were able to reclaim it to meet
peak demand. The recall of released capacity will not reduce already scheduled
volumes for replacement shippers unless they have an opportunity to reschedule.
This protection is already in place for interruptible shippers. The rule will
be implemented in two phases. Pipeline companies must file tariff sheets by May
1, 2002 (effective July 2002) to allow shippers to recall scheduled gas at the
nomination cycles for next-day flow and to recall gas for same-day flow that
has not been scheduled for use on that day. The American Energy Standards Board
has been given 6 months to develop standards for flowing-day or partial-day
recalls, with industry comments due on October 1, 2002, and reply comments on
October 15.
Summary:
Prices at the Henry Hub spot
market continued their general upward trend to end trading last week at the
highest level ($3.54) since June 2001. The April NYMEX contract has gained
almost $0.70 during the past 2 weeks. Despite the recent increase, prices on
the NYMEX for April delivery will likely end trading this week far below last
year's April contract closing price. Net withdrawals from storage slowed to 50
Bcf during the second week of March and total working gas is again more than 40
percent above the 5-year average.