for week ending October 9, 2002 | Release date: October 10, 2002 | Previous weeks
Since Wednesday, October 2,
natural gas spot prices at most Gulf Coast markets have dropped $0.20 to $0.80
per MMBtu with the passing of Hurricane Lili. Although offshore producers and
pipeline companies are still working to return supply operations to normal,
infrastructure damage appears minimal. For the week (Wednesday-Wednesday),
prices at the Henry Hub fell 33 cents or slightly less than 8 percent to $3.91
per MMBtu. The price of the NYMEX futures contract for November delivery at the
Henry Hub decreased slightly more than 24 cents since last Wednesday to settle
at $3.918 per MMBtu yesterday (October 9). Natural gas in storage as of October 4 increased to 3,080 Bcf, which exceeds
the 5-year average by 9 percent. The spot price for West Texas Intermediate
(WTI) crude oil moved down $1.28 per barrel or more than 4 percent since last
Wednesday, trading at $29.31 per barrel or $5.05 per MMBtu.
Spot prices spiraled downward last Friday (October
4) along with Hurricane Lili's downgrade from a Category 4 to a Category 2
storm. Prices at trading locations in the path of the storm along the Louisiana
and East Texas Gulf Coasts declined most precipitously, as fears of extensive
infrastructure damage faded. Prices at the Henry Hub, which was shut down for
part of the week, dropped 41 cents per MMBtu to an average of $3.85 per MMBtu
on the day. The significant decline in prices spread to key market areas as
well, with marketers appearing to have little problem in meeting slack demand
at the other end of the pipelines. After reaching a high of $5.00 per MMBtu
earlier in the week, the New York citygate price ended the week down 84 cents
to an average of $4.16 on Friday. Since late last week, however, spot prices
along the Gulf Coast and other trading locations have recovered modestly, with
the average price yesterday (October 9) at the Henry Hub averaging $3.91 per
MMBtu. Trading in the Rockies this week partially offset rare gains from the
previous week. After a summer of depressed prices, prices gained nearly $1.00
per MMBtu at several Rockies trading locations during the previous week
(Wednesday, September 25-Wednesday, October 2), owing in part to a production
shut-in of about 400 MMcf per day in the Jonah gas field. However, by Friday
(October 4), supplies returned to normal and the price gains proved to be
short-lived. On the week, the price at Opal, Wyoming, fell $1.05 per MMBtu to
an average of $1.76 yesterday.
On the NYMEX, the futures contract for November delivery settled at $3.918 per MMBtu on Wednesday (October 9), a decline of slightly more than 24 cents on the week. The sharpest price movement of the week occurred last Thursday as the downgrade of Hurricane Lili resulted in a drop of 43.6 cents per MMBtu to $3.724. Since last Thursday, the near-month contract has regained strength, climbing modestly in four consecutive sessions on continued concerns about storm damage, although limited, and a possible conflict with Iraq. The strip price of settlement prices for futures contracts for delivery in the ensuing 12 months is hovering near the $4-mark, settling yesterday at $3.965 per MMBtu. The January 2003 contract gained 2.2 cents per MMBtu to settle at $4.265.
Spot Prices ($ per MMBtu) |
Thur. |
Fri. |
Mon. |
Tues. |
Wed. |
3-Oct |
4-Oct |
7-Oct |
8-Oct |
9-Oct |
|
Henry Hub |
4.26 |
3.85 |
3.77 |
3.86 |
3.91 |
New York |
4.97 |
4.16 |
4.12 |
4.21 |
4.24 |
Chicago |
3.97 |
3.68 |
3.75 |
3.87 |
3.94 |
Cal. Comp. Avg,* |
3.40 |
3.07 |
3.33 |
3.46 |
3.48 |
Futures ($/MMBtu) |
|
|
|
|
|
Nov delivery |
3.724 |
3.739 |
3.740 |
3.862 |
3.918 |
Dec delivery |
3.959 |
3.969 |
3.990 |
4.120 |
4.158 |
*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 underground storage was 3,080 Bcf for
the week ended Friday, October 4, according to the EIA Weekly Natural Gas
Storage Report. The week's implied net
injection of 42 Bcf was about 35 percent less than the 5-year average of 65
Bcf. (See
Storage Figure) With
tropical storms limiting supply from the Gulf of Mexico area for the second
week in a row, the Producing Region registered a net withdrawal of 3 Bcf for
the week. The net withdrawal for the region followed an injection of just 1 Bcf
the previous week, when Tropical Storm Isidore also resulted in production
shut-ins. Injections in the East Consuming Region fell to 39 Bcf, or about 13
percent from the 5-year average of 45 Bcf. With the relatively low injection
last week, the storage differential compared with the 5-year average was 9
percent as the difference in volumes dropped to 254 Bcf. Temperatures fell
below normal in the West for the week ending October 5, while
warmer-than-normal temperatures blanketed the East.(See
Temperature Map) (See Deviation Map) In the Northeast, warm temperatures limited
heating-degree days (HDDs) to just 33 percent of normal HDDs according to the
National Weather Service. In fact, temperatures across the country remained
moderate and likely generated relatively little weather-driven demand.
All Volumes
in Bcf |
Current Stocks
10/04/02 |
Estimated
Prior 5-Year (1997-2001) Average |
Percent
Difference from 5 Year Average |
Implied Net
Change from Last Week |
One-Week
Prior Stocks 9/27/02 |
|
East Region |
1,810 |
1,737 |
4.2% |
39 |
1,771 |
|
West Region |
406 |
348 |
16.7% |
6 |
400 |
|
Producing
Region |
864 |
742 |
16.4% |
-3 |
867 |
|
Total Lower
48 |
3,080 |
2,826 |
9.0% |
42 |
3,038 |
|
Source: Energy Information Administration: Form EIA-912, "Weekly Underground
Natural Gas Storage Report," and the Historical Weekly Storage Estimates
Database. Row and column sums may not
equal totals due to independent rounding. |
||||||
Storm Shut-ins Continue in Gulf of Mexico: A week
after Hurricane Lili first hit production areas in the Gulf of Mexico, shut-ins
of natural gas production still total 1.4 Bcf a day, according to the Minerals
Management Service (MMS). In it most recent update of production statistics
(released Wednesday, October 9), MMS said that 44 platforms and 1 rig were
still out of operation. Shut-ins have steadily decreased since reaching a high
of 9.9 Bcf per day last Friday (October 4). At that time, MMS reported
evacuations at a total of 748 platforms and 96 rigs out of service. At their
highest level, shut-ins represented approximately 75 percent of natural gas
production in the Gulf, which is the source of roughly 25 percent of the
country's production. MMS estimates that there are a total of 4,000 platforms
in the Gulf (although many are unmanned). There are between 20,000 and 30,000
workers in the offshore at any one time.
FERC Seeks Transparency of Financial Information: The Federal Energy Regulatory Commission
(FERC) on Wednesday (October 9) voted to expand its accounting regulations to
include reporting of new financial information by a wide variety of market
participants. FERC issued a Final Rule that directs public utilities,
licensees, natural gas companies and oil pipelines to report changes in the fair
value of certain investment securities, derivatives and hedging activities.
FERC noted that the action stems, in part, from recent accounting rules issued
by the Financial Accounting Standards Board. The changes will allow FERC an
understanding of the nature and extent to which hedging activities are used by
electric utilities and gas companies, and the impact on the companies'
financial condition. FERC deferred action on the continuation of waivers to the
Commission's financial reporting rules to power marketers, gas marketers, and
power producers. FERC said that it will address reporting by marketers
separately.
Natural Gas Summary from the
Short-Term Energy Outlook:
EIA projects that natural
gas wellhead prices will range from $2.91 to $3.19 per MMBtu through December
2002 and then increase to $3.53 in January 2003, the peak demand month of the
heating season (Short-Term
Energy Outlook, October 2002). Natural gas prices climbed sharply in late September
as hurricanes Isidore and Lili caused production shut downs in the Gulf of
Mexico. However, this price surge is expected to be short-lived, unless the
weather in October is unusually cold or if additional storm activity in the
Gulf curbs production further. Overall in 2002, wellhead prices are expected to
average about $2.76 per MMBtu compared with $4.00 in 2001. Prices during the
upcoming heating season (November through March), assuming normal weather, are
expected to average $3.32 per MMBtu, which is about $0.96 higher than last
winter's price. Prices to residential customers during the heating season are
expected to average $7.55 per MMBtu compared with $7.14 last winter.
Domestic dry natural gas
production is projected to fall by about 1.2 percent in 2002 compared with the
2001 growth rate of 2.4 percent. Lower natural gas prices have reduced
production and resource development incentives from their highs of last year.
Still, current supplies, including natural gas in storage, appear to be at very
comfortable levels. Working gas in storage has remained well above the previous
5-year average since the beginning of the year. As of October 4, 2002, working
gas stocks were 3,080 Bcf, which is 9 percent greater than the 5-year average and
about 3 percent greater than last year at the same time. Furthermore, natural
gas-directed drilling, while down sharply from 2001 levels, is still quite
strong by a longer historical perspective. The weekly gas rig count in
September averaged 736, which is nearly 25 percent more than the recent low of
591 for the week of April 5, 2002. In 2003, production is expected to rebound
by 2.8 percent as demand rises and inventories fall back closer to normal.
Natural gas demand is
expected to increase through the rest of 2002 and into 2003 because of the
expectation of a continued upswing in the U.S. industrial economy in the next
few months and the return of colder weather. Overall in 2002, natural gas
demand is projected to increase by 3.6 percent over 2001 levels as higher
estimated demand in the industrial and power sectors more than offsets the
declines in space-heating demand in the first quarter of 2002. Also,
heating-related demand during the fourth quarter of 2002 is expected to be
greater than during the same period in 2001. In 2003, natural gas demand growth
is expected to increase by 3.5 percent as the economy continues to recover. In
2003, natural gas demand growth is expected across all sectors.
Short-Term Natural Gas Market
Outlook, October 2002
|
||||||
|
History |
Projections |
||||
|
Jul-02 |
Aug-02 |
Sep-02 |
Oct-02 |
Nov-02 |
Dec-02 |
PRICES ($/MMBtu) |
|
|
|
|
|
|
Average
Wellhead Price |
2.81 |
2.70 |
2.70 |
2.91 |
3.15 |
3.19 |
Residential Price |
9.32 |
9.44 |
9.05 |
8.07 |
7.49 |
7.35 |
Electric
Utilities Price |
3.15 |
3.05 |
2.99 |
3.18 |
3.57 |
3.80 |
|
|
|
|
|
|
|
SUPPLY (Trillion Cubic Feet) |
|
|
|
|
|
|
Total Dry
Gas Production |
1.60 |
1.59 |
1.54 |
1.60 |
1.57 |
1.62 |
Net Imports |
0.28 |
0.29 |
0.27 |
0.29 |
0.28 |
0.30 |
Imports |
0.32 |
0.33 |
0.31 |
0.33 |
0.32 |
0.34 |
Exports |
0.04 |
0.04 |
0.04 |
0.04 |
0.04 |
0.04 |
Suppl.
Gaseous Fuels |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
0.01 |
Total New
Supply |
1.877 |
1.882 |
1.812 |
1.888 |
1.853 |
1.917 |
|
|
|
|
|
|
|
Working
Gas in Storage |
|
|
|
|
|
|
Opening |
2.308 |
2.558 |
2.792 |
3.058 |
3.221 |
3.070 |
Closing |
2.558 |
2.792 |
3.058 |
3.221 |
3.070 |
2.589 |
Net
Storage Withdrawal |
-0.249 |
-0.234 |
-0.266 |
-0.163 |
0.151 |
0.481 |
|
|
|
|
|
|
|
Total
Supply |
1.627 |
1.648 |
1.546 |
1.725 |
2.004 |
2.398 |
|
|
|
|
|
|
|
Balancing
Item |
-0.002 |
0.027 |
0.068 |
-0.058 |
-0.076 |
-0.010 |
|
|
|
|
|
|
|
Total
Primary Supply |
1.625 |
1.675 |
1.615 |
1.666 |
1.928 |
2.388 |
|
|
|
|
|
|
|
DEMAND (Trillion Cubic Feet) |
|
|
|
|
|
|
Lease
& Plant Fuel |
0.105 |
0.107 |
0.106 |
0.112 |
0.110 |
0.112 |
Pipeline
Use |
0.040 |
0.040 |
0.036 |
0.039 |
0.049 |
0.064 |
Delivered
to Consumers |
1.480 |
1.528 |
1.473 |
1.516 |
1.770 |
2.212 |
Residential |
0.139 |
0.131 |
0.150 |
0.228 |
0.449 |
0.739 |
Commercial |
0.151 |
0.149 |
0.151 |
0.194 |
0.285 |
0.403 |
Industrial |
0.841 |
0.903 |
0.910 |
0.905 |
0.894 |
0.941 |
Elec
Utility |
0.349 |
0.345 |
0.262 |
0.190 |
0.141 |
0.128 |
Total
Demand |
1.625 |
1.675 |
1.615 |
1.666 |
1.928 |
2.388 |
Source: Energy Information Administration, Short-Term Energy Outlook,
October 2002.