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Natural Gas Weekly Update Archive

for week ending December 11, 2002  |  Release date:   December 12, 2002   |  Previous weeks

Overview:

Spot prices generally moved higher for the week (Wednesday, December 4 to Wednesday, December 11) with exceptions at several Northeast locations, while futures prices experienced robust gains, particularly for contracts for delivery through the end of the heating season. Unusually cold temperatures accompanied the heating seasons first significant and widespread snow storm late last week, and temperatures plunged again ahead of the ice storm of Tuesday and Wednesday. At the Henry Hub, the average spot price gained 41 cents for the week, ending trading yesterday (Wednesday, December 11) at $4.64 per MMBtu. Since last Wednesday, the NYMEX futures contract for delivery in January 2003 gained $0.411 per MMBtu, settling yesterday at $4.709. Natural gas in storage as of Friday, December 6, decreased to 2,794 Bcf, which is 2.9 percent below the 5-year average. The price of West Texas Intermediate crude oil gained 69 cents per barrel for the week, ending trading yesterday at $27.49 per barrel, or $4.74 per MMBtu.

 


 


Prices:

Accelerating price increases over the past two days (Tuesday and Wednesday, December 10-11) pushed average spot prices up for the week (Wednesday to Wednesday) by 10 to as much as 40 cents per MMBtu at most market locations. Yesterdays increases ranged from 12 to 29 cents per MMBtu, as the market reacted in part to a damaging ice storm that engulfed much of the East Coast, mirroring at a magnified level last Thursdays upward surge of up to 19 cents per MMBtu when the first significant storm of the heating season brought heavy snowfall and very cold temperatures from the northern plains across the Midwest and into New England and the Mid-Atlantic. The sharp increase of over 25 cents in the near-month and February 2003 futures contracts on Tuesday at the NYMEX presaged the increased upward momentum. The major exception to the weekly pattern occurred at a number of Northeast market locations, where spot prices were settling down from their unusually high levels of last week, driven in part by transportation restrictions on New York deliveries on the Algonquin system. While Northeast spot prices did participate in yesterdays runup, they were down for the week at most locations. Price decreases ranged from a 17-cent decline, to $5.31 per MMBtu, on TRANSCO for non-New York delivery to a $2.40 drop on Tennessee Zone 6, to $5.22 per MMBtu. As of yesterday, citygate prices for New York and Chicago averaged $5.39 and $4.43 per MMBtu, respectively.

 

On the NYMEX, settlement prices for contracts through the end of the current heating season soared upward around 40 cents per MMBtu for the week, with a major surge in Tuesdays (December 10) trading, during which the near-month (January 2003 delivery) contract gained $0.277 per MMBtu to settle at $4.636. The February and March contracts also rose sharply, by over 26 and nearly 23 cents per MMBtu, respectively, as a noted private weather forecasting team released a report that called for a return to colder-than-normal weather at the end of December after a brief short-term warming trend. Futures prices also had strong gains last Thursday, in response to the EIAs storage report showing an implied net withdrawal of 91 Bcf that increased the deficit with respect to last years levels to 298 Bcf. In yesterdays trading, the January contract added another $0.073 per MMBtu, to settle at $4.709-the highest settlement price for a near-month contract since April 27, 2001, when the June 2001 contract initiated its near-month position at $4.867 per MMBtu.

 

Spot Prices ($ per MMBtu)

Thur.

Fri.

Mon.

Tues.

Wed.

5-Dec

6-Dec

9-Dec

10-Dec

11-Dec

Henry Hub

4.35

4.39

4.32

4.39

4.64

New York

6.16

5.92

5.49

5.23

5.39

Chicago

4.31

4.30

4.19

4.26

4.43

Cal. Comp. Avg,*

4.09

4.09

4.09

4.13

4.33

Futures ($/MMBtu)

 

 

 

 

 

Jan delivery

4.406

4.38

4.359

4.636

4.709

Feb delivery

4.359

4.35

4.332

4.594

4.675

*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 2,794 Bcf for the week ended December 6, according to EIAs Weekly Natural Gas Storage Report. This is nearly 3 percent below the previous 5-year average, and is the first time since the middle of June 2001 that weekly inventories have fallen below the previous 5-year average (See Storage Figure). The implied net withdrawal of 162 Bcf is the largest for this week over the 9-year span of EIA weekly data, exceeding the previous record for this week, set during the extremely cold December of 2000, by 15 Bcf. The implied net withdrawals in both the East Consuming and Producing regions were also record setters. This storage activity occurred during a week marked by significantly colder-than-normal temperatures throughout much of the nation from the Rockies eastward, with date-specific low temperature records being set at numerous locations in the northern plains through the lower Great Lakes to the mid-Atlantic (See Temperature Map) (See Deviation Map) Gas-customer-weighted heating degree-days (HDD) for the week ranged from 18 to nearly 40 percent greater than normal for such high gas-consuming areas as the New England, Middle Atlantic, and East and West North Central Census divisions. Compared with this week last year, HDDs were anywhere from 43 to 93 percent higher in seven of the nine Census divisions, and were 55 percent higher for the United States as a whole.

 

All Volumes in Bcf

Current Stocks 12/6/02

Estimated Prior 5-Year (1997-2001) Average

Percent Difference from 5 Year Average

Implied Net Change from Last Week

One-Week Prior Stocks 11/29/02

East Region

1,640

1,755

-6.6%

-111

1,751

West Region

403

349

15.5%

-8

411

Producing Region

751

772

-2.7%

-43

794

Total Lower 48

2,794

2,876

-2.9%

-162

2,956

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:

EIA Announces Holiday Release Schedule Through 2003: EIA disseminates weekly natural gas storage information in the Weekly Natural Gas Storage Report (WNGSR). Working gas volumes are reported at a national level and for three regions: Consuming East, Consuming West, and Producing. The standard release time and day of the week for the WNGSR is between 10:30 a.m. and 10:40 a.m., Eastern Time (ET), on Thursdays, except for certain weeks with Federal holidays. A new release schedule for weeks through calendar year 2003 is available from the WNGSR web page. During the weeks with the upcoming Christmas and New Years holidays, the WNGSR will be released between 10:30 a.m. and 10:40 a.m. (ET) on Friday.

 

U.S. Energy Firm Applies for License to Develop LNG Terminal in Gulf of Mexico: Chevron Texaco has submitted an application to the Department of Transportation, U. S. Coast Guard, to construct and operate a liquefied natural gas (LNG) terminal in the U.S. Gulf of Mexico. Named Port Pelican, the planned deepwater port will be located 60 miles off the Louisiana coast and if approved will be the first LNG import terminal constructed in the United States in over 20 years. As now envisioned, Port Pelican would be developed in two phases with the first offshore facility designed to process close to 800 million cubic feet of gas per day. The initial phase is expected to be completed and operational in 2006 with a second phase of equal size to follow.

 

Natural Gas Summary from the Short-Term Energy Outlook:

EIA projects that natural gas wellhead prices will average $3.67 per MMBtu through December 2002 and then increase to more than $4.00 in January and February (Short-Term Energy Outlook, released December 9, 2002). Wellhead prices for the overall heating season (November through March), assuming normal weather, are expected to average about $3.90 per MMBtu, or $1.54 more than last winter's levels, while prices to residential customers are expected to average $8.15 per MMBtu compared with $7.14 last winter. Natural gas prices were higher than expected in November as below-normal temperatures throughout much of the nation increased heating demand, placing upward pressure on gas prices. Spot prices at the Henry Hub climbed above $4.00 per MMBtu in the last half of November after ranging between $3.80 and $3.90 per MMBtu during the first half of the month. Overall in 2002, wellhead prices are expected to average $2.96 per MMBtu compared with $4.00 in 2001. In 2003, average wellhead prices are projected to increase $0.63 per MMBtu to $3.59, owing to expectations of higher demand levels than in 2002 and lower storage levels for most of the year compared with 2002 levels.

 

Domestic dry natural gas production is projected to fall by about 1.6 percent in 2002, compared with the 2001 growth rate of 2.4 percent. Lower demand and lower natural gas prices have reduced production and resource development incentives from their highs of last year. Nevertheless, current supplies appear to be at adequate levels. As of December 6, 2002, working gas stocks were 2,794 Bcf, only 2.9 percent less than the 5-year average, despite strong electricity-related demand increases during the second half of the year and hurricane-related outages, as well as the abnormally cold start to the heating season thus far. Furthermore, natural gas-directed drilling, while down sharply from 2001 levels, is still quite strong from a longer historical perspective. The number of gas-directed rigs climbed by 10 to 705 for the week ending December 6, 2002, according to Baker-Hughes Incorporated. This is the third highest gas rig count reported for the week in the 15 years that Baker Hughes has reported rigs separately by gas or oil drilling. In 2003, production is expected to rebound by about 2.7 percent as demand rises and inventories fall back closer to normal.

 

Total natural gas demand for the first half of 2002 fell by 750 Bcf, a decline of 6.5 percent from 2001 levels, although much of the decline was due to weather effects in the residential and commercial sectors. In contrast, natural gas demand in the combined residential and commercial sectors during the second half of 2002 is expected to be 14.4 percent higher than 2001 levels. Overall in 2002, however, natural gas demand is expected to decline by 0.9 percent from the 2001 level, owing to overall weakness in the industrial sector. Solid growth in natural gas demand of 4.0 percent seems likely in 2003, especially if industrial sector consumption expands significantly as expected. For this Outlook, natural gas demand reflects data revisions employed to be consistent with definitions and aggregates used in the 2001 edition of EIA's Annual Energy Review (see "Data Notes" Short-Term Energy Outlook, December 2002). Historical demand data were revised upward by about 1 Tcf per year to adjust for likely undercounting of deliveries to power generating facilities (other than electric utilities) in the data collection system used to report supply and demand in EIA's Natural Gas Monthly and Natural Gas Annual. The revisions did not qualitatively change the pattern of annual demand shifts reported in earlier Outlooks.

 

Short-Term Natural Gas Market Outlook, December 2002 

 

History

Projections

 

Sep-02

Oct-02

Nov-02

Dec-02

Jan-03

Feb-03

PRICES ($/MMBtu)

 

 

 

 

 

 

Average Wellhead Price

2.90

3.26

3.64

3.67

4.07

4.19

Residential Price

9.54

8.23

7.90

7.97

8.14

8.31

Electric Utilities Price

3.33

3.57

4.19

4.41

4.81

5.01

 

 

 

 

 

 

 

SUPPLY (Trillion Cubic Feet)

 

 

 

 

 

 

Total Dry Gas Production

1.49

1.54

1.52

1.58

1.69

1.52

Net Imports

0.28

0.29

0.28

0.31

0.32

0.28

Imports

0.33

0.34

0.32

0.35

0.36

0.32

Exports

0.05

0.04

0.04

0.04

0.04

0.04

Suppl. Gaseous Fuels

0.01

0.01

0.01

0.01

0.01

0.01

Total New Supply

1.772

1.835

1.806

1.898

2.018

1.806

 

 

 

 

 

 

 

Working Gas in Storage

 

 

 

 

 

 

Opening

2.773

3.057

3.149

2.945

2.457

1.809

Closing

3.057

3.149

2.945

2.457

1.809

1.416

Net Storage Withdrawal

-0.283

-0.092

0.204

0.488

0.648

0.393

 

 

 

 

 

 

 

Total Supply

1.489

1.742

2.010

2.386

2.666

2.199

 

 

 

 

 

 

 

Balancing Item

0.082

-0.078

-0.062

0.015

0.005

0.175

 

 

 

 

 

 

 

Total Primary Supply

1.571

1.664

1.948

2.401

2.672

2.374

 

 

 

 

 

 

 

DEMAND (Trillion Cubic Feet)

 

 

 

 

 

 

Lease & Plant Fuel

0.090

0.093

0.092

0.097

0.100

0.090

Pipeline Use

0.040

0.044

0.053

0.067

0.075

0.066

Delivered to Consumers

1.442

1.527

1.803

2.238

2.496

2.217

Residential

0.141

0.254

0.476

0.740

0.938

0.808

Commercial

0.149

0.196

0.283

0.388

0.469

0.423

Industrial

0.904

0.890

0.898

0.968

0.965

0.882

Elec Utility

0.249

0.186

0.146

0.141

0.124

0.105

Total Demand

1.571

1.664

1.948

2.401

2.672

2.374

 

Source: Energy Information Administration, Short-Term Energy Outlook, December 2002.