for week ending January 2, 2003 | Release date: January 3, 2003 | Previous weeks
A trend of generally
declining natural gas spot prices across the country since mid-December came to
an abrupt halt yesterday (Thursday, January 2) owing to new forecasts of an
Arctic front expected to arrive soon in the Lower 48. During the first day of
trading in the New Year, the Henry Hub spot price moved up 34 cents per MMBtu
to $4.94, but was still 6 cents lower in comparison with the average last
Thursday. For the week (Thursday-Thursday), the price of the NYMEX futures
contract for February increased just over $0.26 per MMBtu to $5.251. Natural
gas in storage decreased to 2,417 Bcf, which trails the 5-year average by 3.8
percent, for the week ending December 27. Crude oil prices have provided little
reprieve from the cautious energy outlook for the rest of the winter, as they
continue to hover around 2-year highs owing to political strife in Venezuela
and the Iraqi situation, both of which contribute to supply concerns for U.S. markets.
Although the spot price for West Texas Intermediate (WTI) crude oil declined
$0.64 per barrel on the week, the spot price gained $0.76 yesterday to an
average of $31.97, or $5.51 per MMBtu.
A sharp upturn in spot
prices at most trading locations yesterday (Thursday, January 2) reversed a
downward trend in prices since mid-December. However, price increases of 20 to
40 cents per MMBtu along the Gulf Coast and other production areas only
partially offset declines over seven straight trading sessions since December
19. With the temperatures near 60 degrees in Chicago and other major
gas-consuming markets earlier this week, the average price at the Henry Hub reached
a low of $4.60 per MMBtu, or about 13 percent off its recent high of $5.14 two
weeks earlier. The Henry Hub spot price then recovered 34 cents per MMBtu
yesterday, while other production-area points in the Midcontinent and West
Texas registered slightly lower increases of 20 to 30 cents. After the National
Weather Service and private forecasters called for more cold weather in the
Eastern United States for this weekend and particularly cold weather for late
next week, price increases in the Northeast were steeper. The average spot
price at the New York citygate gained $0.66 per MMBtu to $6.10, while flow
restrictions at Algonquin Gas Transmission's Cromwell Compressor Station in
Massachusetts also likely contributed to price increases of nearly a $1 per MMBtu
or more at other trading points in the Northeast. In comparison to the East,
Rockies and California prices were relatively unchanged owing to more moderate
weather in the West. The average price at the PG&E citygate in northern
California gained $0.10 to $4.53 per MMBtu yesterday, but has dropped $0.39
since last Thursday.
At the NYMEX, the futures contract for February
delivery took over as the near-month contract on Monday (December 30) after the
January contract expired at $4.988 per MMBtu last Friday. At just under $5 per
MMBtu, the January contract's settlement was about $0.78 higher than its open
as the near-month contract at $4.21 on November 27. The February contract lost
$0.23 per MMBtu during trading early this week before moving up about $0.46
yesterday to a two-week high of $5.251, also likely owing to the new forecasts
of colder weather. Since last Thursday (December 26), the 12-month strip, which
is the average of futures prices for the coming year, has risen $0.22 per MMBtu
to $4.826.
Spot Prices ($ per MMBtu) |
Fri. |
Mon. |
Tues. |
Wed. |
Thur. |
27-Dec |
30-Dec |
31-Dec |
1-Jan |
2-Jan |
|
Henry Hub |
4.78 |
4.75 |
4.60 |
Holiday |
4.94 |
New York |
5.39 |
5.28 |
5.44 |
Holiday |
6.10 |
Chicago |
4.71 |
4.61 |
4.55 |
Holiday |
4.81 |
Cal. Comp. Avg,* |
4.58 |
4.50 |
4.29 |
Holiday |
4.37 |
Futures ($/MMBtu) |
|
|
|
|
|
Jan delivery |
4.988 |
expired |
expired |
expired |
expired |
Feb delivery |
5.022 |
4.800 |
4.789 |
holiday |
5.251 |
Mar delivery |
4.892 |
4.710 |
4.692 |
holiday |
5.131 |
*Avg.
of NGI's reported avg. prices for: Malin, PG&E citygate, |
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and
Southern California Border Avg. |
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Source:
NGI's Daily Gas Price Index (http://intelligencepress.com). |
Storage:
Working gas in storage was 2,417 Bcf or 3.8 percent
below the 5-year average for the week ending December 27, according to EIA's Weekly Natural Gas Storage Report (See
Storage Figure). The implied net withdrawal was 123 Bcf,
which is 22 percent lower than the 5-year average withdrawal of 157 Bcf, and 3
Bcf lower than the comparable week last year. Across the country, the weather
finally offered a brief respite from this season's early cold as temperatures
were about 8 percent warmer than normal as measured by heating degree days
(HDDs) adjusted for the population with space heating from natural gas,
according to the Natural Weather Service (See
Temperature Map) (See Deviation Map). In the heavily populated New England and
Middle Atlantic regions, HDDs were 14 and 10 percent, respectively, lower than
normal. Because the change in working gas fell short of the average over the
past 5 years, the difference in inventory levels narrowed to 95 Bcf. Storage
inventories in the West fell by 26 Bcf, which is the largest withdrawal of the
season for the region, as colder-than-normal temperatures prevailed in much of
the region.
All Volumes in Bcf |
Current Stocks 12/27/02 |
Estimated Prior 5-Year (1997-2001) Average |
Percent Difference from 5 Year Average |
Implied Net Change from Last Week |
One-Week Prior Stocks 12/20/02 |
|
East Region |
1,400 |
1,528 |
-8.4% |
-68 |
1,468 |
|
West Region |
353 |
307 |
15.0% |
-26 |
379 |
|
Producing Region |
664 |
677 |
-1.9% |
-29 |
693 |
|
Total Lower 48 |
2,417 |
2,512 |
-3.8% |
-123 |
2,540 |
|
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. |
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Pipeline Safety Standards
Strengthened Under New Law: On Tuesday, December 17, President Bush signed into law the
“Pipeline Safety Improvement Act of 2002,” which toughens inspection and other
safety standards and enacts additional related provisions for interstate
natural gas and hazardous liquids pipelines. One part of the legislation involves more stringent pipeline inspection
requirements, notably the requirement that pipelines with the highest risk
factors must be inspected within 5 years of the law's enactment. This is estimated to affect at least
one-half of existing natural gas pipelines. Remaining pipelines must be inspected within the next 5 years. All pipelines must then be re-inspected at
least every 7 years. Other key measures
of the new law include increased penalties for pipeline operators who violate
regulations, “whistle-blower” protection for employees who report hazardous
situations to outside authorities, and expanded involvement of States in
pipeline oversight.
Summary:
Warmer-than-normal temperatures in many major
gas-consuming areas of the nation during the holiday season led to lower spot
prices through the end of the year. However, spot and futures prices recovered
most of late December's decline on Thursday (January 2), owing to expectations
of colder weather in the next couple of weeks. Net implied withdrawals from
storage dropped from much higher withdrawal levels in early December to 123 Bcf
for the week ending December 27. At 2,417 Bcf, inventory levels remain about
3.8 percent below the 5-year average.