for week ending May 29, 2002 | Release date: May 30, 2002 | Previous weeks
Since Wednesday, May 22,
natural gas spot prices were down at most locations, despite gains ranging
between 2 and 14 cents per MMBtu on Wednesday, May 29. For the week, prices at the Henry Hub
declined 9 cents to $3.29 per MMBtu, which is a decrease of almost 3
percent. Moderate temperatures and
falling crude oil prices contributed to declines in demand for natural gas as
neither cooling demand nor heating demand for gas seemed sufficient to avoid
the price declines. The NYMEX futures
contract for June delivery at the Henry Hub expired yesterday (May 29) at $3.42
per MMBtu. The spot price for West
Texas Intermediate (WTI) crude oil decreased $1.37 per barrel or over 5 percent
since last Wednesday, trading at $25.64 per barrel or $4.42 per MMBtu.
Prices:
Spot prices declined at most market locations in the
Lower 48 States during the past week, driven principally by declines heading
into the Memorial Day weekend that could not be completely reversed by the
modest increases that occurred following the holiday. On Friday, May 24, prices fell between 14 and 20 cents at most
market locations with steeper declines occurring in the Rockies, Midcontinent,
and California as demand softened owing to moderate temperatures and light
industrial demand over the holiday weekend. Since Memorial Day, prices have climbed, with the largest increases
occurring on Wednesday, May 29, as most locations reported gains ranging
between 2 and 14 cents. At some Rocky Mountain locations, spot prices increased
between 10 and 45 cents yesterday, leading to the only net increases in
week-to-week prices in the country, although prices remain lower than elsewhere
with the highest reported price in this region at $2.56 per MMBtu. Price declines for the week were the largest
in the Midcontinent, where prices fell over 6 percent at most locations. At the Henry Hub in Louisiana, prices fell
almost 3 percent to $3.29 per MMBtu.
At the NYMEX, the settlement
price of the futures contract for June delivery at the Henry Hub fell by almost
4 cents during the week to a final settlement price of $3.420 per MMBtu. Prices of the futures contracts for delivery
during each month remaining in 2002 climbed between 10 and 14 cents per MMBtu
on Wednesday, May 29. These increases
were driven by both rising crude oil prices, which jumped over 2 percent on
Wednesday, and short-covering as many traders likely shifted their positions in
the expiring June contract into contracts for delivery further into the
future. The price of the futures
contract for July delivery at the Henry Hub settled at $3.505 on Wednesday,
almost 8 cents higher than the price of the expiring June contract, and nearly
22 cents greater than the Henry Hub spot price. The contract for July delivery begins trading as the new
near-month contract today (Thursday, May 30).
Spot Prices ($ per MMBtu) |
Thur. |
Fri. |
Mon. |
Tues. |
Wed. |
23-May |
24-May |
27-May |
28-May |
29-May |
|
Henry Hub |
3.38 |
3.22 |
3.22 |
3.21 |
3.29 |
New York |
3.73 |
3.55 |
3.55 |
3.52 |
3.64 |
Chicago |
3.43 |
3.24 |
3.24 |
3.21 |
3.32 |
Cal. Comp. Avg,* |
3.48 |
2.34 |
2.34 |
2.69 |
2.73 |
Futures ($/MMBtu) |
|
|
|
|
|
June delivery |
3.438 |
3.347 |
Holiday |
3.280 |
3.420 |
July delivery |
3.521 |
3.446 |
Holiday |
3.373 |
3.505 |
*Avg. of NGI's reported
avg. prices for: Malin, PG&E
citygate, |
|||||
and Southern California
Border Avg. |
|||||
Source: NGI's Daily Gas
Price Index (http://intelligencepress.com). |
Storage:
According to the EIA Weekly Natural Gas
Storage Report, net injections into storage in the Lower 48
States were 71 Bcf for the week ended Friday, May 24. This is similar to the 5-year average of 73 Bcf for the report
week, and reflects the generally moderate temperatures during that week. (See Temperature Map) (See Deviation Map). Last year's injection of 87 Bcf during the
same report week was the highest since 1994. The year-over-year surplus of working gas in storage fell by 16 Bcf to
442 Bcf during the week. Nevertheless,
total stocks remain over 300 Bcf or nearly 22 percent above the 5-year
average. With the stock build
proceeding close to historical averages, and the current level exceeding the
5-year maximum level, it appears likely that the level of gas in storage will
be sufficient for the upcoming heating season. (See Storage Figure)
All Volumes
in Bcf |
Current
Stocks 5/24/2002 |
Estimated
Prior 5-Year (1997-2001) Average |
Percent
Difference from 5 Year Average |
Net Change from
Last Week |
One-Week
Prior Stocks 5/17/2002 |
|
East Region |
848 |
787 |
8% |
35 |
813 |
|
West Region |
267 |
213 |
25% |
8 |
259 |
|
Producing
Region |
681 |
476 |
43% |
28 |
653 |
|
Total Lower
48 |
1,796 |
1,477 |
22% |
71 |
1,725 |
|
Source: Energy Information Administration: Form EIA-912, "Weekly Underground
Natural Gas Storage Report," and the Historical Weekly Storage Estimates
Database. |
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Other Market Trends:
FERC Investigates Natural
Gas Wash-Trading: The Federal Energy
Regulatory Commission (FERC) has expanded its investigation into "wash-trading"
activities to include natural gas transactions. FERC, which earlier launched an investigation into such trading
by electric power marketers, has given all sellers of natural gas in the U.S.
portion of the Western Systems Coordinating Council and/or Texas during the
years 2000-2001 until June 5, 2002, to "admit or deny" engaging in wash-trading
activities. FERC defines wash-trading
as involving the "sale of natural gas together with a simultaneous purchase of
the same product at the same price." The practice, which has also been called "round-trip" and "sell/buyback"
trading, has drawn the attention of regulators for possibly contributing to the
manipulation of natural gas and electricity prices. If companies admit to wash-trading, FERC instructed them to
provide "transaction by transaction" details. Specifically, FERC required companies to identify traders participating
in the transactions and to explain the methods used to arrive at the value or
compensation of such transactions. On
May 21, FERC began investigating similar transactions in electricity trading,
requiring "admit or deny" responses from companies by May 31, 2002. To date, several large energy marketers,
including Reliant Energy and CMS Energy, have acknowledged in public statements
that they have engaged in wash-trading of electric power.
Natural Gas Rig Counts: The number of rigs
exploring for natural gas increased by 29 to 725 for the week ended Friday, May
24, according to Baker-Hughes Incorporated. Natural gas rigs are nearly 30 percent below last year at this time when
they numbered 1,030. However, since the
week ended April 5, 2002, when natural gas rigs numbered 591, the number of
rigs has increased for seven straight weeks, climbing almost 3 percent per week
on average. The rig count now is almost
23 percent above the level recorded on April 5 and is at its highest level
since the first week of January 2002. According to the EIA Short-Term
Energy Outlook (released May 6), aggregate lease revenues from domestic
oil and gas production are expected to move up this year and settle at about
$300 million per month in 2003, which would be an increase of approximately 50
percent over the rates seen at the end of 2001. Inasmuch as these revenues are a strong
determinant of industry cash flow, which in turn is a powerful driver of
drilling activity levels, an upward trend in gas drilling levels is anticipated
for this year and into 2003.
Summary:
Spot prices declined at most
market locations during the week since May 22 with declines ranging between 5
and 18 cents. The futures contract for
June delivery expired yesterday, settling at $3.42 per MMbtu. Net injections into storage totaled 71 Bcf,
which was close to historical averages and in the range of market expectations.
Natural Gas Summary from the Short-Term
Energy Outlook