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Overview:Thursday, December 5 2002 (next release 2:00 p.m. on December 12)

Cold weather over the Thanksgiving weekend and early this week lifted natural gas spot prices in many regions of the country. While prices at several Northeast trading locations climbed more than $1 per MMBtu since Wednesday, November 27, prices along the Gulf Coast and other producing areas increased by a more modest 4 to 25 cents per MMBtu. On the week (Wednesday-Wednesday), the Henry Hub spot price rose $0.04 per MMBtu to $4.24. At the NYMEX, the price of the futures contract for January delivery climbed just under a dime to $4.298 per MMBtu. Cold weather throughout the final full week in November also resulted in the seasonís largest withdrawal from storage. Natural gas in storage as of Friday, November 29, decreased by 91 Bcf to 2,956 Bcf, which exceeds the 5-year average by 0.9 percent.The spot price of West Texas Intermediate (WTI) crude oil dropped $0.54 per barrel in trading yesterday (Wednesday, December 4), settling at $26.80, or $4.62 per MMBtu.,

 


 

 


Prices:

After a Thanksgiving week with no trading on Thursday or Friday, cash markets this week adjusted quickly to new short-term forecasts of cold weather across much of the country, including key gas-consuming areas in the Northeast. The Henry Hub spot price reversed ground after price declines last week, gaining 16 cents per MMBtu to an average of $4.35 by Tuesday, only to drop back to $4.23 again yesterday (Wednesday, December 4). Price gains in the Northeast have been considerably larger with demand for space heating on Monday driving prices at the New York citygate up $1.19 per MMBtu, or 24 percent, to $6.34. The New York citygate price is still nearly $1 per MMBtu more than last week, although it dropped 43 cents to an average of $5.91 yesterday. A compressor outage on Algonquin Gas Transmission and restrictions on Tennessee Gas Pipeline in the Northeast likely contributed to prices rising well above $7 on the pipelines in trading yesterday. The Tennessee Zone 6 spot price averaged $7.62 per MMBtu, an increase of $2.81 on the week. In contrast to the price variability in the East, prices in California and other western states were flat or up by no more than 16 cents on the week.

 

Settlement prices on the futures market reversed late Novemberís downward trend to record gains of about a dime on the week. The futures contract for January delivery at the Henry Hub yesterday closed at $4.298 per MMBtu, up slightly more than 7 cents on the day. The contract hit a closing high of $4.32 per MMBtu for the week on Monday, then dropped 9.4 cents on Tuesday amid selling pressure with longer-term weather forecasts reflecting a possible warming trend for later in December. The possibility of another El Nino phenomenon this winter, which would increase the likelihood of a warmer-than-normal January and February, continues to temper futures prices. The 12-month strip, or the average price of the futures contracts for each month in 2003, on Wednesday closed at $4.077, up 4.2 cents.

 

 

Spot Prices ($ per MMBtu)

Thur.

Fri.

Mon.

Tues.

Wed.

28-Nov

29-Nov

2-Dec

3-Dec

4-Dec

Henry Hub

holiday

holiday

4.23

4.35

4.23

New York

holiday

holiday

6.14

6.34

5.91

Chicago

holiday

holiday

4.17

4.28

4.20

Cal. Comp. Avg,*

holiday

holiday

4.01

4.09

4.01

Futures ($/MMBtu)

 

 

 

 

 

Jan delivery

holiday

holiday

4.320

4.226

4.298

Feb delivery

holiday

holiday

4.259

4.175

4.243

*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 2,956 Bcf or 0.9 percent above the 5-year average for the week ending November 29, according to EIAís Weekly Natural Gas Storage Report(See Storage Figure).The implied net withdrawal was 91 Bcf, the highest withdrawal for the week since 1996. The decline in inventories compares with an average net withdrawal of 17 Bcf for comparable weeks during the past 5 years and a 4 Bcf injection last year. Across the country, the weather for the week ended November 30 was about 9 percent colder than normal as measured by the National Weather Serviceís (NWS) most recent gas-customer weighted heating degree-day (HDD) report (See Temperature Map) (See Deviation Map). In the heavily populated New England and Middle Atlantic Census regions, HDDs were 17 percent% higher than normal. HDDs for the month of November totaled 596, or 2 percent more than normal. Although this seasonís inventories have dropped 298 Bcf below last yearís mark for this week, inventories currently remain more than 500 Bcf above the less than 2,500 Bcf in storage at this time in 2000.

 

 

All Volumes in Bcf

Current Stocks 11/29/02

Estimated Prior 5-Year (1997-2001) Average

Percent Difference from 5 Year Average

Implied Net Change from Last Week

One-Week Prior Stocks 11/22/02

East Region

1,751

1,791

-2.2%

-58

1,809

West Region

411

356

15.4%

-4

415

Producing Region

794

783

1.4%

-29

823

Total Lower 48

2,956

2,931

0.9%

-91

3,047

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.

 

Other Market Trends:

Natural Gas Rig Counts:The number of rigs drilling for natural gas climbed by 16 to 708 for the week ending November 27, according to Baker-Hughes Incorporated. This is the third highest rig count recorded for the report week in the 15 years that Baker-Hughes has reported rigs separately by gas or oil drilling.Natural gas rigs are roughly 10 percent below last year at this time, however that is when they numbered a near-record high of 785 for the report week.Natural gas rigs are almost 3 percent above the 5-year (1997-2001) average for the report week, and nearly 1 percent over the average number of rigs so far in 2002.The share of rigs drilling for natural gas has been consistently above 80 percent since early last year.Since the week ended May 17, 2002, rigs drilling for natural gas have comprised roughly 84 percent of total rigs drilling, which is close to a record for the split between gas and oil rigs.Rigs drilling for natural gas last week constituted 83.2 percent of rigs drilling in the United States, which is the highest share of rigs drilling for natural gas for the report week in 15 years. The emphasis on gas prospects undoubtedly reflects a relative advantage in the economics of natural gas prospects compared with domestic crude oil prospects.

 

Summary:

Reflecting higher aggregate demand across the country, prices in the producing regions increased generally less than a $0.25 per MMBtu on the week. Continued cold weather in the Northeast this week lifted prices in the region by more than $1.00 per MMBtu since last Wednesday. Storage withdrawals continued at a rapid pace for this time of year, with the industry pulling 91 Bcf for the week ending November 29. At 2,956 Bcf, however, inventories remain slightly above the 5-year average.

 

 

Natural Gas Summary from the Short-Term Energy Outlook

 

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