Overview:  Thursday, July 11, 2002 (next release 2:00 p.m. on July 18)

Since Wednesday, July 3, natural gas spot prices have declined at most locations east of the Rocky Mountains, while climbing at most markets in the West.  For the week (Wednesday-Wednesday), prices at the Henry Hub fell 6 cents or 2 percent to $3.04 per MMBtu.  High temperatures contributed to increased cooling demand for gas, which spurred the price hikes in the West, while smaller demand owing to the Fourth of July holiday weekend likely contributed to the declines in the East.(See Temperature Map) (See Deviation Map) The price of the NYMEX futures contract for August delivery at the Henry Hub fell 20 cents yesterday (July 10) to settle at $2.864 per MMBtu, almost 28 cents less than last Wednesday’s price.  Natural gas in storage increased to 2,353 Bcf, which exceeds the 5-year average by more than 19 percent.  The spot price for West Texas Intermediate (WTI) crude oil moved down  9 cents per barrel or less than 1 percent since last Wednesday, trading at $26.73 per barrel or $4.61 per MMBtu.

 

 

Prices:

Spot prices fell at most market locations east of the Rockies, while prices in the West increased driven principally by soaring temperatures in the region.  Since Wednesday, July 3, many locations in the West recorded gains ranging between $0.21 and $1.47, although prices there remain below those prevailing in eastern markets. Most of the gains occurred on Monday, July 8, following the Fourth of July weekend with the larger price hikes occurring in California   At Malin, Oregon, prices more than doubled since last Wednesday climbing to $2.69 per MMBtu.  In contrast, prices generally fell in the eastern two-thirds of the country, although some markets in the Midcontinent eked out narrow gains of up to 4 cents per MMBtu.  Elsewhere in the East, price declines ranged between about a penny and 17 cents per MMBtu at most markets.  The largest drop in price since last Wednesday occurred in New York, where the price fell 33 cents or over 9 percent to average  $3.31 on Wednesday, July 10.   

 

At the NYMEX, the price of the futures contract for August delivery at the Henry Hub fell by almost 28 cents during the week to settle at $2.864 per MMBtu on Wednesday, June 10.  This is the lowest price for a  near-month futures contract since March 7, 2002.  Contributing factors to the decline in futures prices likely include lessened demand due to milder temperatures in the East this week, and expectations that working gas in storage will remain abundant.  Prices of the futures contracts for delivery during the remaining months in 2002 fell roughly 20 to 27 cents per MMBtu since last Wednesday, July 3.  Yesterday (July 10), the settlement prices of these contracts declined between 10 and 13 cents.  Although the price of the August futures contract is nearly 18 cents less than the Henry Hub spot price, prices of the contracts for the peak winter months of December through February are 59 cents or more above the current Henry Hub spot price.  This relative price pattern remains a strong incentive for additions of natural gas to storage for the winter heating season.

 

Spot Prices ($ per MMBtu)	Thur.	Fri.	Mon.	Tues.	Wed.
	4-Jul	5-Jul	8-Jul	9-Jul	10-Jul
Henry Hub	3.10	3.10	3.06	2.98	3.04
New York	3.64	3.64	3.73	3.35	3.31
Chicago	3.07	3.07	3.00	2.90	2.98
Cal. Comp. Avg,*	2.13	2.13	2.71	2.85	2.88
Futures ($/MMBtu)
Aug delivery	Holiday	Closed	2.939	2.991	2.864
Sept delivery	Holiday	Closed	2.982	3.029	2.902
*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:

Working gas in storage was 2,353 Bcf for the week ended Friday, July 5, 2002, according to the EIA Weekly Natural Gas Storage Report.  This is 19 percent above the 5-year average for the report week, and 19 percent above the level last year for the same week. (See Storage Figure) The implied net change was 67 Bcf, which is almost 21 percent below the 5-year average weekly change of 85 Bcf.  However, to this point in the refill season, implied net injections of natural gas into storage have closely approximated historical levels, despite beginning the injection season with an extraordinarily high level of gas in storage.  Working gas in storage was roughly 400 Bcf greater than the 5-year average at the beginning of the refill season and is 373 Bcf above average as of July 5.  Since April 1, 2002, net injections have averaged roughly 9.3 Bcf per day, only 5 percent less than the 5-year average of 9.8 Bcf per day to this point in the refill season.

 

All Volumes in Bcf	Current Stocks 7/5/2002	Estimated Prior 5-Year (1997-2001) Average	Percent Difference from 5 Year Average	Net Change from Last Week	One-Week Prior Stocks 6/28/2002
East Region	1,243	1,115	12%	52	1,191 R
West Region	329	273	21%	9	320
Producing Region	781	589	33%	6	775 R
Total Lower 48	2,353	1,977	19%	67	2,286 R
Source:  Energy Information Administration:  Form EIA-912, "Weekly Underground Natural Gas Storage Report," and the Historical Weekly Storage Estimates Database. R=Revised

 

Other Market Trends:

New revision policy under consideration by EIA:  The Energy Information Administration (EIA) is soliciting public comments on a proposed new revision policy for the Weekly Natural Gas Storage Report (WNGSR) in a Federal Register notice published July 11, 2002.  The current policy calls for reporting a revision when the cumulative effect of changes is at least 7 billion cubic feet at either a regional or national level.  Revisions are released as part of the next scheduled WNGSR on the EIA web site.  Comments are solicited by EIA regarding a new policy that would allow larger scale revisions to be reported in an unscheduled release on the EIA web site.  It is proposed that volume revisions below a specified threshold will be released according to the established official schedule and that larger volume changes will trigger a release outside the official schedule.  Special topics for public comment include the appropriateness of the overall plan, volume thresholds that trigger a separate report, timing of unscheduled releases, and methods to notify the public in the case of an unscheduled report.  Comments submitted in response to this Federal Register notice will be considered during development of EIA’s new policy for revisions of the WNGSR.  Comments must be filed by August 12, 2002. 

 

Canadian Natural Gas Division Releases Annual Review and Outlook: Canadian natural gas producers and exporters had a record year for volumes and revenues in 2001, according to the Natural Gas Division of Natural Resources Canada. In its annual Canadian Natural Gas: Market Review & Outlook, the Division notes that although prices weakened during the year, prices in 2001 averaged out at record highs. Total revenues as measured at the processing plant tailgate, including exports and domestic sales for Canadian producers, set a new record at Cdn$37.6 billion.  Export revenues accounted for Cdn$22.8 billion, an increase of 21 percent over last year. Gross export volumes for the year increased 4 percent for a total of 3,728 Bcf. However, with imports tripling to about 228 Bcf as a result of the newly-constructed Vector Pipeline re-importing gas into Canada, net exports fell slightly to 3,500 Bcf.  In its long-term outlook to 2010, the Division said that it expects U.S. and Canadian demand to reach 31.8 Tcf, or approximately 7.8 Tcf over demand in 2001. The mix of supply sources expected to satisfy this demand includes: U.S. gas production (22.9 Tcf); Canadian gas production (8.1 Tcf); and LNG imports to the United States (1.2 Tcf).

 

 

Natural Gas Summary from the Short-Term Energy Outlook