for week ending August 21, 2002 | Release date: August 22, 2002 | Previous weeks
Natural gas prices continued their upward trend for
a second consecutive week with most market locations in the Lower 48 States
registering gains of up to 25 cents per MMBtu since Wednesday, August 14.
Continued hot temperatures across the country and an increase in oil prices
resulted in prices generally ranging between $3.15 and $3.25 per MMBtu along
the Gulf Coast, representing new 8-week highs. At the NYMEX, the price for the
futures contract for September delivery closed on Wednesday, August 21, at
$3.274 per MMBtu, an increase of just over 36 cents, or about 12.5 percent, on
the week. Working gas in storage for the week ended Friday, August 16 was 2,657
Bcf, which exceeds the average for the previous 5 years by 13.1 percent. On the
week (Wednesday-Wednesday), the spot price for West Texas Intermediate (WTI)
crude oil gained $2.18 to end trading yesterday at $30.37 per barrel, or $5.24
per MMBtu
Natural gas spot prices at many
trading locations advanced to 8-week highs as hot temperatures continued in
many regions and a surge in the price of crude oil to over $30 per barrel
boosted prices for many energy commodities. The Henry Hub spot price on
Tuesday, August 20, rose to $3.26 per MMBtu, the highest spot price at this market
since July 1. On the week (Wednesday-Wednesday), the Henry Hub price increased
19 cents to $3.22 per MMBtu. Elsewhere along the Gulf Coast, as well as in
Southwest producing regions, gains ranged mostly from 15 to 20 cents over last
week's prices. Price increases in the West were more modest. California spot
prices registered gains of between 7 and 12 cents as temperatures moderated in
the past couple of days. Without the hot temperatures in key demand centers in
California and the Northwest, Rockies prices once again dropped well below
prices in other regions of the country. The spot price on Questar's system in
the Rockies fell 44 cents for the week to $1.22 per MMBtu on Wednesday, August
21, the lowest price in the country, and exactly $2 below the average spot
price at the Henry Hub. In contrast, the spot price in Florida on Florida Gas
Transmission was the highest in the country, advancing to $3.81 per MMBtu
during a week of pipeline restrictions and heavy electric power demand.
At the NYMEX, natural gas futures
prices also climbed to their highest levels in over 8 weeks. The futures
contract for September delivery closed on Wednesday, August 21, at $3.274 per
MMBtu, an increase of $0.364 on the week, with significant settlement-price
increases on 3 of the 5 trading days. First, the price of the near-month
contract jumped nearly 22 cents last Thursday with the release of new storage
inventory estimates. Then, along with a surge in crude oil prices likely owing
in part to tensions in the Middle East, natural gas futures registered gains of
more than a dime on Monday and Wednesday of this week. The September contract
has gained just over 61 cents, or 23 percent, from its lowest settlement price
as the near-month contract of $2.660 per MMBtu, recorded on August 7. The
futures contract for January 2003 almost breached the $4-mark this week before
dropping to $3.974 per MMBtu at yesterday's close. The 12-month strip settled
at $3.726 per MMBtu.
Spot Prices ($ per MMBtu) |
Thur. |
Fri. |
Mon. |
Tues. |
Wed. |
15-Aug |
16-Aug |
19-Aug |
20-Aug |
21-Aug |
|
Henry Hub |
2.92 |
3.10 |
3.10 |
3.26 |
3.22 |
New York |
4.07 |
3.64 |
3.49 |
3.66 |
3.67 |
Chicago |
2.86 |
3.02 |
3.00 |
3.16 |
3.11 |
Cal. Comp. Avg,* |
2.65 |
2.76 |
2.77 |
2.90 |
2.84 |
Futures ($/MMBtu) |
|
|
|
|
|
Sept delivery |
3.127 |
3.149 |
3.267 |
3.166 |
3.274 |
Oct delivery |
3.172 |
3.208 |
3.327 |
3.226 |
3.339 |
*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 2,657 Bcf for the week
ending August 16, according to EIA's Weekly
Natural Gas Storage Report, which is 13.1 percent above the 5-year average
(See
Storage Figure). The implied net injection for the week was
37 Bcf, which represents a 41 percent decline from the 5-year average injection
of 63 Bcf for the week. The decreased level of injections came during a week in
which temperatures across the country were 18 percent higher than normal as
measured by cooling degree days (CDDs). (See
Temperature Map) (See Deviation Map) The
Mid-Atlantic and New England regions of the country registered the greatest
variation of CDDs from normal weather, with each region posting close to or
more than double the average CDDs for the week. Although the difference in
stock levels between this year and last declined to 231 Bcf, the current
inventory level is 530 Bcf greater than inventory for the comparable week two
years ago. The implied net injection was the second time this summer that
injections dropped below 40 Bcf. The lowest injection during the summer weeks
of 2001 was 46 Bcf.
All Volumes
in Bcf |
Current
Stocks 8/16//2002 |
Estimated
Prior 5-Year (1997-2001) Average |
Percent
Difference from 5 Year Average |
Implied Net
Change from Last Week |
One-Week
Prior Stocks 8/9/02 |
|
East Region |
1,494 |
1,402 |
6.6% |
35 |
1,459 |
|
West Region |
368 |
310 |
18.7% |
1 |
367 |
|
Producing
Region |
795 |
638 |
24.6% |
1 |
794 |
|
Total Lower
48 |
2,657 |
2,350 |
13.1% |
37 |
2,620 |
|
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:
The Energy Information
Administration (EIA) solicited 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 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
were 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 was 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 included 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. The
comment period closed on August 12, 2002. EIA received comments from 26 companies or individuals, and these
comments will be considered during the formulation of a potential new policy
for revisions of the WNGSR.
Natural Gas Summary from the Short-Term Energy Outlook:
EIA
projects that natural gas wellhead prices will range between $2.63 and $2.72
per MMBtu during the months through October without the wide variations that
occurred over the spring and early summer months (Short-Term
Energy Outlook, August 2002). Prices are expected to be less variable unless unusually hot weather
in late summer results in gas being diverted from storage to meet the added cooling
demand, or colder-than-normal weather for October results in an unexpected
drawdown of storage stocks. Overall in 2002, wellhead prices are expected to
average about $2.73 per MMBtu compared with $4.00 in 2001. Prices during the
upcoming heating season (November through March), assuming normal weather, are
expected to average close to $3.12 per MMBtu, which is about $0.75 higher than
last winter's price but only about 10-15 percent higher than current prices.
Domestic dry natural gas production is projected to
fall by about 2.3 percent in 2002 compared with the 2001 growth rate of 2.4
percent. Lower natural gas prices have reduced production and resource
development incentives from their highs of last summer. Still, current
supplies, including natural gas in storage, appear to be at very comfortable
levels. Working gas in storage is estimated to have reached almost 2,600 Bcf by
the end of July, which is about 15 percent above the 5-year average and almost
300 Bcf higher than a year ago. Furthermore, gas-directed drilling, while down
sharply from the record levels of summer 2001, is still quite strong by a
longer historical perspective. The gas rig count as of August 2, 2002, was 729,
which is 23 percent above the recent low of 591 for the week of April 5, 2002.
Natural gas demand this summer is projected to be 4.6
percent higher than last summer's level, rather than the 3.6 percent increase
projected in the July Outlook.
Growth is due partly to the fall in natural gas prices since a year ago and the
slowly reviving economy, as well as an expected increase in the amount of
natural gas required for power generation this summer. Natural gas demand for
the entire year 2002 is projected to increase by 3.0 percent over 2001 levels,
an upward revision of projected demand in the last Outlook. The revision is due to expected higher demand figures
for the electric power sector. This growth shows up in the industrial sector
because of the inclusion of nonutility generation in that category. In 2003,
natural gas demand growth is expected to increase by 2.8 percent as the economy
continues to recover. In 2003, natural gas demand growth is expected across all
sectors.