for week ending September 25, 2002 | Release date: September 26, 2002 | Previous weeks
Since Wednesday, September
18, natural gas spot prices have declined at most locations in the Lower 48 States.
However, prices climbed at some market locations, with a few locations reporting gains of as much as 60 cents
during the same period. For the week
(Wednesday-Wednesday), prices at the Henry Hub fell 4 cents or roughly 1
percent to $3.75 per MMBtu. The price
of the NYMEX futures contract for October delivery at the Henry Hub decreased
29 cents since last Wednesday to settle at $3.494 per MMBtu yesterday. Natural gas in storage increased to 2,991
Bcf, which exceeds the 5-year average by slightly more than 11 percent. The spot price for West Texas Intermediate
(WTI) crude oil increased $1.12 per barrel or almost 4 percent since last
Wednesday, climbing past the $30 per barrel mark to trade at $30.69 per barrel
or $5.29 per MMBtu as fears of a looming war with Iraq intensified.
Hurricane Isidore made headlines in the trade press
each day of a tumultuous week of trading, which was marked by considerable
day-to-day price variability. However, by Wednesday, September 25, prices
had fallen up to 35 cents at most market locations since last Wednesday as
fears that Isidore might have a strong impact on production in the Gulf of
Mexico dissipated. Daily gains or declines
in excess of a dime were not unusual during the week as Isidore meandered
erratically through the Gulf of Mexico: first as a tropical storm, then as a hurricane, and again as a tropical
storm. Prices climbed on Monday and
Tuesday, as Isidore was poised to re-enter the Gulf of Mexico after stalling
near the Yucatan Peninsula in Mexico, and was expected to regain
hurricane-force winds. However, the
storm moved briskly up the Gulf at about 7 miles per hour, and was unable to
strengthen before making landfall early this morning at Grand Isle,
Louisiana. Production shut-ins of more
than 4 Bcf per day, according to some sources, contributed to some of the price
increases as well as concerns that Hurricane Isidore might wreak havoc on production facilities in the Gulf
region. On Wednesday, September 25,
prices tumbled between 10 and 38 cents as it became apparent that the storm
would not pose a significant threat to production. For the week, the largest
declines occurred in Florida, where prices fell 97 cents. In the MidContinent, Midwest, and California
regions, price declines ranged between 22 and 35 cents. Prices have increased since last Wednesday
at some points in the Northeast and Louisiana, climbing about a nickel, and in
the Rocky Mountains region, climbing up to 60 cents per MMBtu.
At the NYMEX, the price of the futures contract for
October delivery at the Henry Hub has decreased 29 cents since Wednesday,
September 18, to settle at $3.494 per MMBtu on Wednesday, September 25. Factors contributing to the decline in
futures prices likely include the unusually high volumes of natural gas in
storage and falling spot prices. Prices of the futures contracts for delivery
during the remaining months in 2002 and through the heating season have fallen
by 22 to 25 cents per MMBtu since last Wednesday, September 18, with the larger
decreases occurring for the more immediate months' contracts. Prices of the contracts for the peak winter
months of December through February are more than 27 cents above the current
Henry Hub spot price. This price
differential provides an incentive for continued additions of natural gas to
storage for the winter heating season.
Spot Prices ($ per MMBtu) |
Thur. |
Fri. |
Mon. |
Tues. |
Wed. |
19-Sep |
20-Sep |
23-Sep |
24-Sep |
25-Sep |
|
Henry Hub |
3.89 |
3.94 |
3.87 |
3.98 |
3.75 |
New York |
4.19 |
4.27 |
4.19 |
4.42 |
4.21 |
Chicago |
3.90 |
3.85 |
3.80 |
3.86 |
3.56 |
Cal. Comp. Avg,* |
3.65 |
3.51 |
3.64 |
3.63 |
3.32 |
Futures ($/MMBtu) |
|
|
|
|
|
Oct delivery |
3.856 |
3.758 |
3.978 |
3.742 |
3.494 |
Nov delivery |
4.106 |
3.992 |
4.175 |
3.929 |
3.793 |
*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 2,991 Bcf for the week ended
Friday, September 20, 2002, according to the EIA Weekly Natural Gas Storage
Report. This is 11.1 percent above
the 5-year average for the report week, and almost 5 percent above the level
last year for the same week.(See Storage Figure) Moreover, this already is 258 Bcf or more
than 9 percent above the level entering the heating season at the end of
October 2001. The implied net
injections for last week were 67 Bcf, which is roughly 8 percent below the
5-year average of 73 Bcf for the report week. Implied net injections were less than the 5-year average in the East and
West consuming regions, being 3 Bcf and 2 Bcf below the average build for the
report week, respectively. Meanwhile,
in the Producing region, injections were equal to the 5-year average. If net injections continue to approximate
the 5-year average, then working gas in storage will be close to 3,300 Bcf by
the end of October when the refill season ends. This exceeds last year's working gas stocks at the beginning
of the heating season by about 5
percent. (See Temperature Map) (See Deviation Map)
All Volumes
in Bcf |
Current
Stocks 9/20/2002 |
Estimated
Prior 5-Year (1997-2001) Average |
Percent
Difference from 5 Year Average |
Implied Net
Change from Last Week |
One-Week
Prior Stocks 9/13/02 |
|
East Region |
1,732 |
1,646 |
5.2% |
45 |
1,687 |
|
West Region |
399 |
338 |
18.0% |
5 |
394 |
|
Producing
Region |
860 |
709 |
21.3% |
17 |
843 |
|
Total Lower
48 |
2,991 |
2,692 |
11.1% |
67 |
2,924 |
|
Source: Energy Information Administration: Form EIA-912, "Weekly Underground
Natural Gas Storage Report," and the Historical Weekly Storage Estimates
Database. |
||||||
Other Market Trends:
FERC Chief Judge Finds El
Paso Corporation Exercised Market Power During California Energy Crisis: In an
initial decision issued on Monday, September 23, Chief Administrative Law Judge
Curtis L. Wagner, Jr. found that El Paso Corporation withheld “extremely large
amounts of capacity” on its pipeline system for delivery of natural gas to the
southern California border in the period November 2000-March 2001, during which
natural gas and electric power prices in California reached unprecedented
levels. Average daily spot gas prices
on both the Southern California Gas Company (SOCAL) and Pacific Gas and
Electric Company systems spiked to more than $59 and $50 per MMBtu,
respectively. Wagner concluded that El
Paso withheld up to 696 MMcf per day of pipeline capacity for California
delivery by various means, including not operating the pipeline at the maximum
allowable operating pressure, conducting unnecessary maintenance, and simply
choosing not to use available capacity to flow gas to at least one California
receipt point. Stating that El Paso's
operations constituted a clear and unlawful exercise of market power, Wagner
recommended that the full Commission begin proceedings to penalize El Paso.
FERC Approves U.S. Leg Of
Millennium Pipeline Project: Last Wednesday (September 18), the FERC issued a pipeline
certificate for the U.S. segment of the much-delayed Millennium Pipeline, which
is intended to bring gas from Canada to the New York City market area. Originally proposed in December 1997, the
pipeline would stretch about 442 miles from Dawn, Ontario, near Lake Erie to
the New York City area, providing up to 700 MMcf per day of additional
capacity. U.S. sponsors of the pipeline
include Columbia Gas Transmission (which has the majority interest and will
develop and operate the pipeline), MCN Energy Group, and Westcoast Energy (a
subsidiary of Duke Energy). One of the
major causes of delay for project approval had been resistance of the city of Mount
Vernon, NY, to the original route that had the pipeline passing directly
through the city. The developers and
the city were able to find a mutually agreeable compromise, clearing the way
for FERC approval. However, the
Canadian leg of the project has yet to be approved by Canada's National Energy
Board (NEB). The Canadian sponsors,
TransCanada PipeLines and Saint Clair Pipeline, Ltd., who had applications
pending before the NEB, withdrew them last August when the U.S. approval
process dragged on and on.
Summary:
Spot prices movements were
mixed during the week since September 18 with decreases at most market
locations. The futures contract price
for October delivery fell by 29 cents, settling at $3.494 per MMBtu. As of September 20, working gas storage
stocks were 2,991 Bcf, a level well above the maximum for this week during the
past 5 years.