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Overview:  Thursday, July 25, 2002 (next release 2:00 p.m. on August 1)

Since Wednesday, July 17, natural gas spot prices have declined at most locations in the Lower 48 States, generally falling up to 11 cents.  However, steeper declines were recorded at some market locations.  For the week (Wednesday-Wednesday), prices at the Henry Hub fell 7 cents or 2 percent to $2.91 per MMBtu.  Price drops at most locations were driven principally by moderating temperatures since Monday, July 22.  The price of the NYMEX futures contract for August delivery at the Henry Hub increased over 15 cents yesterday (July 24) to settle at $3.042 per MMBtu, more than 20 cents greater than last Wednesday’s price.  Natural gas in storage increased to 2,486 Bcf, which exceeds the 5-year average by more than 17 percent.  The spot price for West Texas Intermediate (WTI) crude oil moved down  $1.10 cents per barrel or almost 4 percent since last Wednesday, trading at $26.78 per barrel or $4.62 per MMBtu.




Spot prices increased late last week on the strength of high cooling demand, but have declined since Monday, leading to week-to-week (Wednesday to Wednesday) drops of up to 11 cents at most markets.  Prices increased by Friday, July 19 up to 13 cents per MMBtu over the level on Wednesday, July 17, at most market locations, driven principally by soaring temperatures in most of the country.  However, moderating temperatures since Monday, July 22, led to price declines ranging between 5 and 15 cents per MMBtu. The largest drop in price since last Wednesday occurred in New York, where prices fell 60 cents or over 15 percent to average $3.26 on Wednesday, July 24.  Prices fell by more than 24 cents per MMBtu at some markets in the Rockies.


At the NYMEX, the price of the futures contract for August delivery at the Henry Hub climbed by over 20 cents during the week to settle at $3.042 per MMBtu on Wednesday, July 24.  This is the highest price for the August futures contract since July 3, 2002.  Most of the increase for the week occurred yesterday (July 24) when the price of the August contract gained more than 15 cents.  Contributing factors to the increase in futures prices likely include expectations that warm temperatures will return later in the week, expectations based on technical analysis, and a 56-cent spike in the August crude oil futures contract on Wednesday, July 24. Prices of the futures contracts for delivery during the remaining months in 2002 have increased roughly 9 to 18 cents per MMBtu since last Wednesday, July 17 with the exception of the December contract, which fell about a nickel.  Prices of the contracts for the peak winter months of December through February are 72 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)











Henry Hub






New York












Cal. Comp. Avg,*






Futures ($/MMBtu)






Aug delivery






Sept delivery






*Avg. of NGI's reported avg. prices for:  Malin, PG&E citygate,

and Southern California Border Avg.

Source: NGI's Daily Gas Price Index (



Working gas in storage was 2,486 Bcf as of Friday, July 19, 2002, according to the EIA Weekly Natural Gas Storage Report.  This is 17 percent above the 5-year average for this point in the refill season and almost 16 percent above the level last year for the same week.  The implied net change was 64 Bcf, which is roughly 3 percent below the 5-year average weekly change of 66 Bcf for the report week.  Implied net injections were 3 percent and almost 6 percent less than the 5-year average in the West and East regions, respectively.  Meanwhile, in the Producing region, injections were almost 6 percent above the 5-year average.  Warmer-than-normal temperatures in most regions of the country likely helped reduce net injections in the Consuming regions, while cooler-than-normal temperatures in some parts of the Producing region helped increase injections.  On average, cooling degree-days were over 8 percent above normal in the Lower 48 States for the week ended July 20.   The principal exception to this pattern occurred in the West South Central Census Region, where cooling degree-days were over 12 percent below normal. (See Storage Figure) (See Temperature Map) (See Deviation Map)


All Volumes in Bcf

Current Stocks 7/19/2002

Estimated Prior 5-Year (1997-2001) Average

Percent Difference from 5 Year Average

Net Change from Last Week

One-Week Prior Stocks 7/12/02

East Region






West Region






Producing Region






Total Lower 48






Source:  Energy Information Administration:  Form EIA-912, "Weekly Underground Natural Gas Storage Report," and the Historical Weekly Storage Estimates Database.


Other Market Trends:

MMS Issues Final Notice of Western Gulf Lease Sale: The Minerals Management Service (MMS) will offer several incentives to increase domestic oil and gas production in its upcoming Western Gulf of Mexico lease sale on August 21. For Sale 184, MMS has introduced an incentive that applies to shallow-water deep gas production. A lease in less than 200 meters of water that begins production from a new deep gas reservoir (15,000 feet or greater subsea) within 5 years will receive a royalty suspension on gas production up to 20 billion cubic feet. Royalty relief will be granted to both oil and gas production in water depths of 400 meters or deeper. MMS said royalties will be suspended for volumes up to 5 million barrels of oil equivalent (BOE) in water depths of 400 to 799 meters; volumes up to 9 million BOE in water depths of 800 meters to 1,599 meters; and volumes up to 15 million BOE in water depths of 1,600 meters and deeper. For the lease sale, MMS also adopted several new provisions to safeguard protected species, including a requirement that all aircraft used in operations avoid low flying near brown pelican or whooping crane areas.


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. 



Spot prices fell at most market locations during the week since July 17 with decreases ranging between 1 and 11 cents, except for certain markets in the Northeast and Rocky Mountain region.  The futures contract for August delivery rose over 20 cents, settling at $3.042 per MMbtu.  As of July 21, storage stocks were 2,486 Bcf, a level well above the weekly maximum for the past 5 years. 



Natural Gas Summary from the Short-Term Energy Outlook
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