Spot and futures prices
moved up strongly for the week (Wednesday, September 25 through Wednesday,
October 2) as Tropical Storm Isidore and then Hurricane Lili caused significant
production curtailments in the Gulf of Mexico and onshore Texas and
Louisiana. The average spot price at
the Henry Hub yesterday (Wednesday, October 2), at $4.24 per MMBtu, was 49
cents higher than a week ago. However,
the amount of gas actually delivered at October 2 prices is likely to be small,
as operations at the Henry Hub near Erath, LA, were essentially shut down for
at least 48 hours because of Lili’s impending arrival. On the NYMEX, the expiring near-month
contract for October delivery ended trading on Thursday, September 26 with a
sizeable gain of over 19 cents per MMBtu, closing at $3.686. Taking over as the near-month contract, the
futures contract for November delivery promptly gained $0.152 per MMBtu to
settle at $4.041 on Friday. Natural gas
in storage reached 3,038 Bcf on September 27, which exceeds the average of the
past 5 years by 10 percent. With
continuing turmoil in the Middle East and uncertainty surrounding the conflict
with Iraq over weapons inspections keeping oil prices high, the spot price of
West Texas Intermediate (WTI) crude oil hovered above $30 per barrel throughout
the week. WTI ended trading Wednesday
(October 2) at an average of $30.59 per barrel, or about $5.27 per MMBtu, down
a dime per barrel from the previous Wednesday.
Spot prices at many locations moved steadily upward
beginning last Friday, as a rejuvenated Tropical Storm Lili made its way into
the Gulf of Mexico with a predicted track very similar to Isidore, which had
caused peak production shut-ins of about 8.5 Bcf per day by last Wednesday,
according to the Minerals Management Service of the Department of the
Interior. No sooner had curtailments
dropped to just over 1 Bcf per day by Monday, September 30, than producers were
again evacuating platforms and drilling rigs in response to Lili’s
approach. Prices surged at most
locations on Monday and Tuesday, with increases each day ranging from 15 to
over 50 cents per MMBtu, as Lili gained strength, reaching hurricane
status. However, spot prices fell
yesterday (October 2), just as Lili was becoming a major storm and
transitioning from category 3 to 4 with wind speeds of 135 mph, causing
production shut-ins to increase to 8.6 Bcf per day. Despite Wednesday’s drops, spot prices increased at virtually
every location for the week, with increases generally ranging from 18 to as
much as 84 cents per MMBtu, except for the Rocky Mountain region where the
average increase for all points was $0.98 per MMBtu, to a regional average
price of only $2.87.
On the NYMEX, the contract for October delivery–the
outgoing near-month contract–countered a near-25 cent decline in last
Wednesday’s (September 25) trading with a gain of $0.191 per MMBtu on its final
trading day (Thursday, September 26) to close out at $3.686. On its first day of trading as the
near-month contract, the November contract settled at $4.041 per MMBtu,
becoming the first near-month contract to settle above $4 per MMBtu since June
2001. It settled for $4.160 per MMBtu
yesterday (Wednesday, October 2) for a cumulative gain of $0.271 since becoming
the prompt month contract.
|
Spot Prices ($ per MMBtu) |
Thur. |
Fri. |
Mon. |
Tues. |
Wed. |
|
26-Sep |
27-Sep |
30-Sep |
1-Oct |
2-Oct |
|
|
Henry Hub |
3.59 |
3.76 |
4.09 |
4.38 |
4.24 |
|
New York |
3.95 |
4.02 |
4.48 |
4.94 |
5.00 |
|
Chicago |
3.46 |
3.57 |
4.04 |
4.24 |
4.00 |
|
Cal. Comp. Avg,* |
3.28 |
3.26 |
3.59 |
3.75 |
3.55 |
|
Futures ($/MMBtu) |
|
|
|
|
|
|
Oct delivery |
3.686 |
expired |
expired |
expired |
expired |
|
Nov delivery |
3.889 |
4.041 |
4.138 |
4.067 |
4.160 |
|
Dec delivery |
4.114 |
4.245 |
4.323 |
4.240 |
4.315 |
|
*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). |
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Working gas in underground storage was 3,038 Bcf for
the week ended Friday, September 27, according to the EIA Weekly Natural Gas Storage Report. This is the earliest in the refill season
that inventories have topped 3 Tcf in 10 years. Stocks are also 10 percent greater than the previous 5-year
(1997-2001) average for this date, and just under 4 percent greater than last
year at this time.(See Storage Figure)
At this level, the nation’s storage
facilities are close to 76 percent full, based on EIA’s estimate of working gas
capacity (see the report, The
Basics of Underground Natural Gas Storage, for a discussion
of various storage measures). The
week’s implied net injection of 47 Bcf was about 32 percent less than the
5-year average of 68 Bcf. While
tropical storm news dominated the weather picture for most of the industry,
above-normal temperatures prevailed along both coasts, while below-normal
temperatures covered most of the country’s midsection. (See Temperature Map)
(See Deviation Map) Despite
the deviations from normal temperatures, the relatively moderate temperatures
across much of the country would have limited the amount of weather-related
demand.
In the 2 weeks before the latest storage report, the net change in inventory levels averaged close to 10 percent less than the 5-year average. Even if this below-average level of net injections were to be sustained through the end of October, total stocks would reach almost 3,260 Bcf, which would be 81 percent of working gas capacity. This would be the largest beginning-of-heating-season inventory level since 1991, well before the advent of FERC Order 636 open access storage.
|
All Volumes
in Bcf |
Current
Stocks 9/27/2002 |
Estimated
Prior 5-Year (1997-2001) Average |
Percent
Difference from 5 Year Average |
Implied Net
Change from Last Week |
One-Week
Prior Stocks 9/20/02 |
|
|
East Region |
1,771 |
1,691 |
4.7% |
39 |
1,732 |
|
|
West Region |
400 |
343 |
16.6% |
1 |
399 |
|
|
Producing
Region |
867 |
726 |
19.4% |
7 |
860 |
|
|
Total Lower
48 |
3,038 |
2,761 |
10.0% |
47 |
2,991 |
|
|
Source: Energy Information Administration: Form EIA-912, "Weekly Underground Natural
Gas Storage Report," and the Historical Weekly Storage Estimates
Database. |
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EIA
Releases New Report on the Fundamentals of Natural Gas Storage: EIA prepared a new report to
provide general background information about underground natural gas storage
titled The Basics of Underground Natural Gas Storage. The
report, which was released on October 2, 2002, describes the different types of
underground storage facilities, defines and clarifies key storage measurement
terminology, summarizes categories of storage ownership and operation, and
briefly discusses changing patterns of storage utilization. A key element of the report is its
discussion of relative measures of gas inventories, which attempts to clarify
the notion of “percent full” as applied to storage facilities.
Summary:
Prices on both spot and
futures markets moved up sharply, as first Tropical Storm Isidore, then
Hurricane Lili, caused significant production outages for much of the week in
the Gulf region. Natural gas stocks
rose above 3 Tcf with 5 weeks still remaining in the refill season.
