Overview:  Thursday, August 8, 2002 (next release 2:00 p.m. on August 15)

Since Wednesday, July 31, natural gas spot prices have declined at most locations in the Lower 48 States, generally falling between 17 and 41 cents.  However, steeper declines were recorded at some market locations.  For the week (Wednesday-Wednesday), prices at the Henry Hub fell 31 cents or nearly 14 percent to $2.73 per MMBtu.  Principally moderating temperatures since Monday, August 5 drove price drops at most locations.  The price of the NYMEX futures contract for September delivery at the Henry Hub decreased over 29 cents since last Wednesday to settle at $2.660 per MMBtu yesterday.  Natural gas in storage increased to 2,567 Bcf, which exceeds the 5-year average by more than 15 percent.  The spot price for West Texas Intermediate (WTI) crude oil moved down 44 cents per barrel or almost 2 percent since last Wednesday, trading at $26.58 per barrel or $4.58 per MMBtu.

 

 

Prices:

Spot prices have declined steadily since late last week as a scorching heat-wave subsided, mitigating cooling demand for natural gas and leading to week-to-week (Wednesday to Wednesday) drops of 17 to 41 cents at most markets.  Prices began the week at relatively high levels, driven principally by soaring temperatures in most of the country, and tapered off gradually heading into the weekend as temperatures moderated at most market locations.  This was followed by more pronounced declines in prices since Monday, August 5, as a cool front from Canada swept across most of the eastern two-thirds of the United States.  The largest drop in price since last Wednesday occurred in New York, where prices fell $4.03 or 57 percent to average $3.04 on Wednesday, August 7. In contrast to the overall pattern of decreases, prices climbed by up to 35 cents per MMBtu at some markets in the Rockies and by 4 cents at Malin, Oregon.

 

At the NYMEX, the price of the futures contract for September delivery at the Henry Hub fell by over 29 cents during the week to settle at $2.660 per MMBtu on Wednesday, August 7.  This is the lowest price for the September futures contract since March 1, 2002. Factors contributing to the decline in futures prices likely include the unusually high volumes of natural gas in storage and falling spot prices. Prices of the futures contracts for delivery during the remaining months in 2002 and through the heating season have fallen by 10 to 14 cents per MMBtu since last Wednesday, July 31.  Prices of the contracts for the peak winter months of December through February are more than 64 cents above the current Henry Hub spot price.  This relative price pattern remains a strong incentive for continued additions of natural gas to storage for the winter heating season.

 

Spot Prices ($ per MMBtu)	Thur.	Fri.	Mon.	Tues.	Wed.
	1-Aug	2-Aug	5-Aug	6-Aug	7-Aug
Henry Hub	3.07	2.91	2.81	2.79	2.73
New York	5.97	3.69	3.25	3.18	3.04
Chicago	3.04	2.85	2.76	2.73	2.65
Cal. Comp. Avg,*	2.74	2.53	2.57	2.54	2.48
Futures ($/MMBtu)
Sept delivery	2.842	2.858	2.678	2.716	2.660
Oct delivery	2.874	2.885	2.720	2.755	2.704
*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 2,567 Bcf for the week ended Friday, August 2, 2002, according to the EIA Weekly Natural Gas Storage Report.  This is 15 percent above the 5-year average for the report week, and almost 12 percent above the level last year for the same week.  The implied net change was 33 Bcf, which is roughly 39 percent below the 5-year average weekly change of 54 Bcf for the report week.  Implied net injections were less than the 5-year average in the East and Producing regions, falling 11 Bcf and 13 Bcf below the average build for the report week, respectively.  Meanwhile, in the West region, injections were 3 Bcf above the 5-year average.  Warmer-than-normal temperatures in most regions of the country likely helped reduce net injections in the East and Producing regions, while cooler-than-normal temperatures in some parts of the West region helped increase injections.  On average, cooling degree-days were almost 26 percent above normal in the Lower 48 States for the week ended August 1.   The principal exception to this pattern occurred in the Pacific U.S. Census Region, where cooling degree-days were almost 13 percent below normal.  

(See Storage Figure) (See Temperature Map) (See Deviation Map)

 

All Volumes in Bcf	Current Stocks 8/2//2002	Estimated Prior 5-Year (1997-2001) Average	Percent Difference from 5 Year Average	Implied Net Change from Last Week	One-Week Prior Stocks 7/26/02*
East Region	1,414	1,309	8.0%	33	1,381
West Region	360	300	20.0%	8	352
Producing Region	793	622	27.5%	-8	801
Total Lower 48	2,567	2,231	15.1%	33	2,534
* Revised.  Source:  Energy Information Administration:  Form EIA-912, "Weekly Underground Natural Gas Storage Report," and the Historical Weekly Storage Estimates Database.

 

Other Market Trends:

Natural gas consumption in manufacturing grew by over 8 percent between 1994-98. According to the EIA report Energy Use in Manufacturing: 1994 to 1998 released August 1, 2002, natural gas use increased by 8.4 percent compared with total fuel consumption growth of 7 percent. The two main uses of natural gas by manufacturers are boiler fuel and process heating, which accounted for 89 percent of their gas consumption in 1998, up from 86 percent in 1994. The increase in total energy use was driven primarily by growth in the consumption of natural gas and electricity, with the latter increasing by 14.4 percent.  During this period, U.S. manufacturers used less petroleum and coal in manufacturing processes.  This expansion of gas use occurred although natural gas prices to manufacturing consumers increased by more than 6 percent during the period, rising to an annual average of $2.82 per Mcf in 1998 compared with $2.65 in 1994, while the cost of other major fossil fuels (petroleum products and coal) declined between 5 and 21 percent. The cost of electricity also moved down, declining over 4 percent.

 

 

Comment Period for Potential New Revision Policy Closes On August 12:  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 consideration of EIA’s potential new policy for revisions of the WNGSR.  Comments must be filed by August 12, 2002. 

 

Summary:

Spot prices fell at most market locations during the week since July 31 with decreases ranging between 17 and 41 cents.  The futures contract price for September delivery fell by more than 29 cents, settling at $2.660 per MMBtu.  As of August 2, storage stocks were 2,567 Bcf, a level well above the maximum for this week during the past 5 years. 

 

 

 

Natural Gas Summary from the Short-Term Energy Outlook