for week ending April 10, 2002 | Release date: April 11, 2002 | Previous weeks
Natural gas prices have
declined substantially in the past 7 days. Spot prices at most market locations across the country finished the day
on Wednesday, April 10 down slightly. However the cumulative difference from the previous Wednesday ranged
between $0.21 and $0.89 per MMBtu. Prices at the Henry Hub declined 43 cents per MMBtu from the previous
Wednesday to trade at $3.25 yesterday. On the NYMEX, the price of the futures contract for May delivery at the
Henry Hub settled at $3.184 per MMBtu, down roughly 32 cents since last
Wednesday. The spot price for West
Texas Intermediate (WTI) crude oil declined $1.40 per barrel since the previous
Wednesday, trading at $26.15 per barrel or $4.51 per MMBtu.
Prices:
Spot prices declined since Wednesday, April 3 at
most major trading locations, falling between $0.21 and $.89 per MMBtu. Variability in daily prices was considerable, varying in a range of
about 35 to 49 cents at most market locations. This daily price variability was especially pronounced in the Rocky Mountain region, where daily
price changes varied between $0.37 and $2.21 per MMBtu. A combination of maintenance and pipeline-expansion related outages
significantly curtailed options for transporting gas out of the region, which
effectively eliminated much of the demand for the region’s supplies. Average prices fell to levels below $1 per
MMBtu at some locations in the region. Prices remain well below the levels of last year at this time at nearly
all market locations. For example,
prices at the Henry Hub on Wednesday were $2.30 per MMBtu or 41 percent less
than last year’s price on the same date.
At the NYMEX, the settlement price of the futures
contract for May delivery at the Henry Hub declined over 9 percent since last
Wednesday as more temperate weather eased demand.
Spot Prices ($ per MMBtu) |
Thur. |
Fri. |
Mon. |
Tues. |
Wed. |
4-Apr |
5-Apr |
8-Apr |
9-Apr |
10-Apr |
|
Henry Hub |
3.56 |
3.31 |
3.36 |
3.25 |
3.25 |
New York citygates |
4.08 |
3.80 |
3.72 |
3.59 |
3.59 |
Chicago citygate |
3.61 |
3.34 |
3.40 |
3.28 |
3.28 |
PG&E citygate |
3.47 |
3.17 |
3.23 |
3.16 |
3.15 |
So. Cal. Border Avg. |
3.50 |
3.14 |
3.26 |
3.17 |
3.21 |
Futures ($/MMBtu) |
|
|
|
|
|
May delivery |
3.333 |
3.275 |
3.327 |
3.201 |
3.184 |
June delivery |
3.371 |
3.313 |
3.365 |
3.240 |
3.223 |
Source: NGI's
Daily Gas Price Index (http://intelligencepress.com) |
Storage:
Net withdrawals from storage for the week ended
Friday, April 5, were 9 Bcf according to the American Gas Association (AGA),
which is a marked contrast to the average net injections of 24 Bcf in the
preceding 5 years for the report week. This marks only the third time in the 9-year history of the AGA storage
survey that the net change in working gas stocks for this report week amounted
to a withdrawal. One factor behind the
net withdrawals is the relative price pattern, in which the price of the
futures contract is trading below the Henry Hub spot price. This provides suppliers an economic
incentive to rely on natural gas from storage. Another factor is cooler–than-normal temperatures early in the week
ended Saturday, April 6. According to
the National Weather Service (NWS), heating degree days in the Lower 48 States
were almost 15 percent above normal. However, differences in temperature patterns across the Lower 48 led to
variation in regional storage activity. The East and Producing regions posted net withdrawals of gas from
storage of 13 and 2 Bcf, respectively, in contrast with the preceding 5-year
average net injections of 14 and 2 Bcf. In the West region, injections were 6 Bcf compared with the 5-year average
withdrawal of just over 2 Bcf. Most of
the eastern two-thirds of the country recorded cooler-than-normal temperatures,
while the Pacific and Mountain regions were over 23 percent warmer than normal.
(See Temperature Map) (See Deviation Map)
All Volumes
in Bcf |
Current
Stocks (Fri,4/05) |
Estimated
Prior 5-Year (1997-2001) Average |
Percent
Difference from 5 Year Average |
Net Change
from Last Week |
One-Week
Prior Stocks (Fri, 3/29) |
East Region |
777 |
570 |
36% |
-13 |
790 |
West Region |
244 |
176 |
38% |
6 |
238 |
Producing
Region |
547 |
370 |
48% |
-2 |
549 |
Total Lower
48 |
1,568 |
1,117 |
40% |
-9 |
1,577 |
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. |
According to EIA estimates,
working gas in storage in the continental United States ended the heating
season at a record high 1,574 Bcf on March 31. This 479 Bcf difference is almost 44 percent above the prior 5-year
average for this time of the year.(See Storage Figure) In
addition, stocks were 833 Bcf or 112
percent above last year’s level. Following a record-setting injection season in 2001, withdrawals were
1,570 Bcf, almost 15 percent below the 5-year average, during what proved to be
a mild winter throughout most of the country. This contrasts sharply with the winter of 2000-2001, when withdrawals
from storage totaled 1,844 Bcf, almost 8 percent above the 5-year average. With gas in storage entering the injection
season at the highest level since 1991, gas requirements to refill storage
capacity during the summer of 2002 are well below average, thus reducing upward
demand pressure on price.
Other
Market Trends:
Natural gas
exchanges set record volume: The trading of natural gas futures reached a new
high in March at the New York Mercantile Exchange (NYMEX). NYMEX recorded natural gas futures volume
totaling 2,381,105 contracts last month. The previous record was set in September 1999 at 1,978,582 contracts. Additionally, the NYMEX reported natural gas
options trading volume of 1,043,374 contracts in March, which far exceeded the
previous high of 859,522 contracts traded in January 2002. The increased trading activity in natural
gas contracts at the NYMEX came during a month in which trading volumes for
numerous energy contracts reached all-time highs in the aftermath of the Enron
bankruptcy and an associated reduction in trading volumes in Enron’s online
trading platform. For example, trading at the IntercontinentalExchange (ICE)
has far surpassed historical levels. ICE, which trades natural gas for next-day delivery at numerous pipeline
points, reported natural gas volume for the first quarter of 2002 was 31 Tcf, a
2,600 percent increase over the first quarter of 2001.
Short-Term Energy Outlook: The Energy Information Administration (EIA) released its latest Short-Term
Energy Outlook on Monday, April 8. In this Outlook, EIA notes four factors that have contributed
significantly to the sharp increase in spot and near-term futures prices in
recent weeks: 1) the strength of the anticipated domestic economic recovery; 2)
the potential for greater tightening in, and even disruption of, the world oil
market; 3) the increased role in
domestic electricity output and fuel consumption of the numerous new gas-fired
electric generating plants added over the past 2 years (and still coming on
line in the near future); and 4) the possible impact of the decline in
gas-directed drilling since July 2001 on supply capability in the United
States. However, EIA considers it most
likely that the recent price run-up will be temporary and that prices will move
back towards $2.50 per MMBtu at the wellhead, particularly as the summer season
begins and the relatively high level of inventories tends to dampen
storage-injection related demand.
Nuclear vs.
gas-fired electric generation demand: A recent development
regarding nuclear electricity-generating plants caused a period of heightened
concern for the availability of nuclear generation this summer with potential
implications for natural gas demand. Upon discovery of corrosion in a major
component in a nuclear plant in Ohio, the Nuclear Regulatory Commission (NRC)
ordered the submission of safety information on 68 other units, implying the
possible need for shutdowns for inspections. Because natural gas fired generating plants would generally be the
alternative of choice to replace lost nuclear-generating capacity, the prospect
of widespread shutdowns could have led to a significant increase in natural gas
demand. However, the prospect for
normal operations now appears likely as it appears the problem is confined to
one unit. The temporary loss of this capacity
is offset by increases in capacity at several reactors due to NRC-approved
upgrades ranging from 2 to 20 percent and totaling several hundred megawatts.
Summary:
Spot prices on Wednesday, April 10, showed significant
declines from the previous Wednesday. On the NYMEX, the settlement price of the futures contract for May
delivery at the Henry Hub fell about 9 percent from the previous Wednesday. Net withdrawals of natural gas from storage
were 9 Bcf for the week ended April 5 as a result of cooler-than-normal
temperatures in the Lower 48 States.