Overview:  Thursday, July 18, 2002 (next release 2:00 p.m. on July 25)

Since Wednesday, July 10, natural gas spot prices have declined slightly at most trading locations in the Lower 48 States. For the week (Wednesday-Wednesday), prices at the Henry Hub fell 6 cents or 2 percent to $2.98 per MMBtu. Notable exceptions to the general market trend included a recovery in prices at Rockies trading locations and an upward surge in the spot price at the New York citygate. The price of the NYMEX futures contract for August delivery at the Henry Hub fell $0.023 per MMBtu on the week to settle at $2.841 on Wednesday (July 17). Natural gas in storage for the week ending July 12 increased to 2,422 Bcf, which exceeds the 5-year average by 17.8 percent.  The spot price for West Texas Intermediate (WTI) crude oil increased $1.15 per barrel since last Wednesday, trading at $27.88 or $4.81 per MMBtu.

 

Prices:

Spot prices at trading locations along the Gulf Coast and in the Southwest fell to 4-month lows last week before staging a mild recovery. For the week (Wednesday-Wednesday), prices in the production regions generally fell between 2 and 7 cents per MMBtu. After dropping to $2.82 per MMBtu on Monday, the spot price at the Henry Hub gained 16 cents in the past two trading sessions to average $2.98 per MMBtu on Wednesday, July 17. With moderate weather dominating in the Midwest and Midcontinent, spot prices in those regions similarly drifted lower by 5 percent or less for the week. Despite the general downward price trend across the country, prices in the Rockies and parts of the Northwest had been so low that a heat wave in the regions increased prices by up to 60 cents per MMBtu for the week. However, prices there remain among the lowest in the country. The spot price at Opal, Wyoming, increased 35 cents per MMBtu or 29 percent to an average of $1.56 yesterday.  After dipping below the $1-mark in early July, the spot price on Northwest Pipeline in Sumas, Washington, recovered an additional 27 cents or 20 percent this week to trade at an average of $1.56 per MMBtu on Wednesday. The Northeast also was affected by hot temperatures with prices at many trading locations increasing between 10 and 15 cents on the week, with some notable exceptions. Prices at the New York citygate climbed to $3.86 per MMBtu yesterday, about 55 cents or 16 percent higher than the average price a week ago.

 

At the NYMEX, the price of the futures contract for August delivery at the Henry Hub dropped 2 cents during the week to settle at $2.841 per MMBtu on Wednesday, June 17. With storage inventories remaining considerably above the 5-year average, futures prices have declined since the spring. For the second week in a row, the August contract dipped to its lowest level since early March. At its Wednesday closing price, the price of the August contract is down 28 percent from its recent high point of $3.948 per MMBtu recorded on May 14. The January 2003 futures contract dropped $0.029 per MMBtu on the week to close at $3.706 on Wednesday. However, the spread between the August and January 2003 contracts remains substantial. In trading early this week, the spread was as high as $0.92 per MMBtu, with a difference of $0.87 per MMBtu yesterday (July 17).

 

 

Spot Prices ($ per MMBtu)	Thur.	Fri.	Mon.	Tues.	Wed.
	11-Jul	12-Jul	15-Jul	16-Jul	17-Jul
Henry Hub	2.85	2.86	2.82	2.89	2.98
New York	3.10	3.11	3.18	3.59	3.86
Chicago	2.79	2.78	2.78	2.88	2.97
Cal. Comp. Avg,*	2.62	2.47	2.57	2.69	2.76
Futures ($/MMBtu)
Aug delivery	2.830	2.787	2.784	2.863	2.841
Sept delivery	2.869	2.830	2.825	2.892	2.862
*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 2,422 Bcf for the week ending July 12, according to EIA’s Weekly Natural Gas Storage Report.  For the entire Lower 48 States, the implied net injection for the week was 69 Bcf, or about 13 percent below the 5-year average of 79 Bcf for the week. Because injection activity fell short of last year’s net injection of 101 Bcf for the comparable week, the year-on-year surplus fell to 347 Bcf. Estimated inventories are 366 Bcf, or 17.8 percent, higher than the 5-year average of 2,056 Bcf. (See Storage Figure) In the Consuming West region, net injections for the week were 55 percent lower than last year as high temperatures throughout the region likely spurred higher cooling demand in the region. In the West, temperatures were 20 to 40 percent hotter than normal as measured by cooling degree days (CDDs) for the week ending July 13. (See Temperature Map) (See Deviation Map) CDDs in the New England region were 41 percent higher than last year for the week.

 

All Volumes in Bcf	Current Stocks 7/12/2002	Estimated Prior 5-Year (1997-2001) Average	Percent Difference from 5 Year Average	Net Change from Last Week	One-Week Prior Stocks 7/5/02
East Region	1,296	1,169	10.9%	53	1,243
West Region	338	284	19.0%	9	329
Producing Region	788	603	30.7%	7	781
Total Lower 48	2,422	2,056	17.8%	69	2,353
Source:  Energy Information Administration:  Form EIA-912, "Weekly Underground Natural Gas Storage Report," and the Historical Weekly Storage Estimates Database.

 

Other Market Trends:

FERC approves Kern River expansion: On Wednesday, July 17, the Federal Energy Regulatory Commission (FERC) approved the Kern River 2003 Expansion Project, which will provide additional infrastructure to Western markets. The pipeline expansion will cost $1.2 billion and add over 885 million cubic feet per day of capacity to the Kern River system, bringing total system capacity to more than 1.7 billion cubic feet per day. The Kern River pipeline expansion will extend roughly 716 miles from Wyoming to California, running through Nevada and Utah. The pipeline, which is expected to come on line by May 2003, will utilize six existing compressor stations and three new compressor stations.  FERC expects that the new pipeline will allow local distribution companies to meet peak needs and deliver natural gas to new electric generation plants. The pipeline is expected to serve approximately 30 percent of the new generation coming on line in southwestern California. Several supply basins will be interconnected by the project, which will facilitate transporting gas from suppliers to consumers in the West. 

 

 

Summary:

Spot prices at most trading locations along the Gulf Coast and the Southwest declined slightly during the week since July 11. Exceptions to the general market trend included prices in the Rockies and the Northeast, where high temperatures resulted in increased cooling demand and price increases of up to 60 cents. The futures contract for August delivery eased $0.023 per MMBtu on the week to close on Wednesday at $2.841 per MMBtu. As of July 12, storage stocks were 2,422 Bcf, a level about 17.8 percent above the average for the past 5 years. 

 

 

Natural Gas Summary from the Short-Term Energy Outlook