for week ending January 8, 2003 | Release date: January 9, 2003 | Previous weeks
Spot
prices overall showed strong gains since Tuesday, December 31. Futures prices were mixed, with the February
and March contracts retreating slightly from their levels of Thursday, January
2 (the first day of trading in the New Year), while out-month contracts had
slight gains. Temperatures were
relatively warm throughout most of the nation for a third consecutive week,
while at the same time a weekend snow storm in the Middle Atlantic and
Northeast helped push spot prices higher at the end of last week. At the Henry Hub, the average spot price
rose 47 cents for the week (prices for Wednesday, January 1, deliveries were
established in trading on December 31), to end trading yesterday (Wednesday,
January 8) at $5.07 per MMBtu. The
NYMEX futures contract for February delivery declined 9 cents per MMBtu,
settling yesterday at $5.161. Natural
gas in storage as of Friday, January 3 decreased to 2,331 Bcf, which is just 2
Bcf below the 5-year (1998-2002) average. The spot price for West Texas Intermediate (WTI) crude oil, which had
reached $33.26 per barrel on Friday, fell to $30.66 per barrel, or $5.29 per
MMBtu yesterday.
Spot prices moved up on Thursday
and Friday (January 2-3), then declined Monday and Tuesday, as weather
forecasts vs. actual daily temperatures sent conflicting signals to
markets. Prices on Wednesday reversed
direction yet again, as the massing of Arctic air in Northeastern Canada was
noted. Prices increased at virtually all market locations on Wednesday, with
increases ranging from 11 to 49 cents per MMBtu. At the Henry Hub, the average spot price climbed 18 cents to
$5.07 per MMBtu. The largest gains
occurred in the Northeast. Continuing
transportation restrictions on both Tennessee and Algonquin contributed
partially to the rising prices. The New
York citygate price rose 15 cents, to $6.26 per MMBtu. Wednesday's strong gains left spot prices
significantly higher for the week. Even
Rockies locations saw increases of several pennies despite the continuing warm
temperatures in the region. The highest
weekly increases also occurred in the Northeast, where prices rose an average
of 77 cents per MMBtu to an average of $5.98 per MMBtu as of the end of trading
on Wednesday.
Futures settlement prices also exhibited swings, as
the near-month contract (February delivery) increased by 46 cents per MMBtu and
fell by 40 cents during the past 5 trading days. Both changes appear related to contrasting weather
forecasts. However, the February
contract had consecutive gains on Tuesday and Wednesday, leaving it at $5.161
per MMBtu at settlement yesterday (Wednesday, January 8). The contract for March delivery mirrored the
near-month contract's path over the past week, settling yesterday at $5.111 per
MMBtu, for a net change of 2 cents since last Thursday's (January 2) settlement
price.
Spot Prices ($ per MMBtu) |
Thur. |
Fri. |
Mon. |
Tues. |
Wed. |
2-Jan |
3-Jan |
6-Jan |
7-Jan |
8-Jan |
|
Henry Hub |
4.94 |
5.13 |
4.95 |
4.89 |
5.07 |
New York |
6.10 |
6.26 |
6.38 |
6.11 |
6.26 |
Chicago |
4.81 |
5.01 |
4.81 |
4.75 |
4.99 |
Cal. Comp. Avg,* |
4.37 |
4.55 |
4.40 |
4.41 |
4.67 |
Futures ($/MMBtu) |
|
|
|
|
|
Feb delivery |
5.251 |
5.344 |
4.935 |
5.127 |
5.161 |
Mar delivery |
5.131 |
5.220 |
4.870 |
5.047 |
5.111 |
*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 2,331 Bcf for the week
ended January 3, according to EIA's Weekly
Natural Gas Storage Report (See Storage Figure),
which is virtually identical to the 5-year average (2,333 Bcf). Implied net withdrawals were 86 Bcf, marking
the second time in 3 weeks that withdrawals have fallen below 100 Bcf. The unseasonably warm weather throughout the
nation during that week was a likely factor that kept net withdrawals at only
57 percent of the 150 Bcf average for the past 5 years (1998-2002). (See Temperature Map)
(See Deviation Map.) According to the latest data from the
National Weather Service, gas customer-weighted heating degree-days (HDD) fell
below normal for the week by double-digit percentages in all nine of the Census
Divisions in the Lower 48 States, ranging from 16 percent below normal in the
Middle Atlantic and New England to 30 percent below normal in the Pacific and
the West South Central (TX, LA, OK, and AR). For the United States as a whole, HDDs were 24 percent less than
normal.
All Volumes
in Bcf |
Current
Stocks 1/3/032 |
Estimated
Prior 5-Year (1997-2001) Average |
Percent
Difference from 5 Year Average |
Implied Net
Change from Last Week |
One-Week
Prior Stocks 12/27/02 |
|
East Region |
1,333 |
1,416 |
-5.9% |
-67 |
1,400 |
|
West Region |
342 |
293 |
16.7% |
-11 |
353 |
|
Producing
Region |
656 |
624 |
5.1% |
-8 |
664 |
|
Total Lower
48 |
2,331 |
2,333 |
-0.1% |
-86 |
2,417 |
|
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. |
||||||
S&P Notes Slowdown in Pipeline Projects: After a boom in natural gas pipeline construction, the number of new pipeline
projects appears to be slowing, according to Standard & Poors (S&P).
S&P noted in a report that recent pipeline additions mostly have been
driven by electric power plant construction, which will likely slow in the
coming years owing in part to an oversupply of electricity in many regions of
the country. In the Northeast, there will likely be an expansion of the
Maritimes and Northeast Pipeline, which transports gas into the region from
Sable Island production in Eastern Canada. Activity on projects bringing
natural gas from traditional routes from the South has slowed to a "virtual
standstill" after a tremendous amount of activity in the last couple of years.
In the Southeast, a region targeted with several proposals for pipeline
expansions to meet demand from new power plants, S&P allows for the
construction of at least one new major pipeline to transport re-gasified
natural gas from Bahamas-based liquefied natural gas (LNG) terminals into
Florida. According to S&P, it seems probable that one or more of the
proposed pipelines — AES Corp.'s Ocean Express, Tractebel North America Inc.'s
Calypso, and El Paso Global LNG's Seafarer — will be built. Lastly, S&P
reported that expansions out of the Rockies and into California are on the
drawing board, the largest of which are the 1 Bcf per day expansion of the Kern
River pipeline and El Paso Corp's 750 MMcf per day expansion.
Natural Gas Rig Count: The number of rigs drilling for natural gas dropped 16 to 706 for the week
ending January 3, according to Baker-Hughes Incorporated. This is the first
week that the number of rigs drilling for gas has declined since the week
ending November 8, when rigs numbered 673. The current number of rigs is 6
percent below the level last year at this time. The total number of rigs in the
United States, including natural gas and oil drilling, declined 25 to 837 this
week. Natural gas drilling continues to account for an increasingly larger
portion of drilling activity with its share growing to 84.3 percent from 83.8
percent last week. This is the highest percentage of rigs dedicated to natural
gas over oil production since the middle of September, when natural gas rigs
accounted for 86.4 percent of rig activity.
Natural Gas Summary from the Short-Term
Energy Outlook:
EIA projects that natural
gas wellhead prices will average $4.20 per MMBtu through January 2003 and then
increase to $4.61 in February and $4.23 in March (Short-Term
Energy Outlook, released January 8, 2003). Wellhead prices for the overall heating
season (November through March), assuming normal weather, are expected to
average about $4.10 per MMBtu, or $1.74 more than last winter's levels, while
prices to residential customers are expected to average $8.51 per MMBtu
compared with $7.14 last winter. Natural gas prices were higher than expected
in November and December 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 $5.00 per MMBtu in the second week of
December and stayed near or above this threshold through the end of the month.
Overall in 2002, wellhead prices are expected to average $2.90 per MMBtu
compared with $4.00 in 2001. In 2003, average wellhead prices are projected to
increase about $1.00 per MMBtu over the 2002 level to $3.90 per MMBtu, owing to
expectations of higher demand levels than in 2002 and lower storage levels for
most of the year compared with 2002 levels.
Total natural gas demand in 2002 declined by an estimated 1.7 percent
from the 2001 level, mainly because of overall weakness in the industrial
sector, particularly in the first three quarters of the year. However, solid growth
in natural gas demand of 4.7 percent seems likely in 2003, especially if
industrial sector consumption expands significantly as expected. In 2004,
natural gas demand is projected to rise by an additional 2.7 percent as
industrial demand continues its recovery from its 2002 lows.
Based on preliminary data through September 2002,
domestic dry natural gas production appears to have been mostly flat in 2002
compared with an estimated growth rate of 2.4 percent in 2001. Lower demand and
lower natural gas prices in 2002 reduced production and resource development
incentives relative to 2001. As of January 3, 2003, working gas stocks were
2,331 Bcf, which is only 2 Bcf (0.1 percent) less than the 5-year average,
despite the abnormally cold weather in November and December. Furthermore,
natural gas-directed drilling while down sharply from 2001 levels, is still
quite strong from a longer historical perspective. Also, the gas-directed rig
rate rose in December. Baker-Hughes reported that the number of rigs drilling
for natural gas averaged 714 in December compared with 683 in November. In
2003, production is expected to be 19.45 trillion cubic feet, which would be a
solid increase from production levels in 2002. Also, net imports of natural gas
are expected to increase in both 2003 and 2004, which should relieve some of
the potential upward price pressure on the domestic market
Short-Term
Natural Gas Market Outlook, January 2003
|
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|
History
|
Projections
|
||||
|
Oct-02 |
Nov-02 |
Dec-02 |
Jan-03 |
Feb-03 |
Mar-03 |
PRICES ($/MMBtu) |
|
|
|
|
|
|
Average
Wellhead Price |
3.26 |
3.50 |
3.94 |
4.20 |
4.61 |
4.23 |
Residential Price |
8.23 |
8.52 |
8.31 |
8.45 |
8.55 |
8.71 |
Electric
Utilities Price |
3.62 |
4.15 |
4.53 |
4.98 |
5.40 |
4.93 |
|
|
|
|
|
|
|
SUPPLY (Trillion Cubic Feet) |
|
|
|
|
|
|
Total Dry
Gas Production |
1.60 |
1.59 |
1.66 |
1.68 |
1.51 |
1.67 |
Net
Imports |
0.28 |
0.29 |
0.31 |
0.34 |
0.30 |
0.31 |
Imports |
0.34 |
0.33 |
0.35 |
0.37 |
0.33 |
0.35 |
Exports |
0.05 |
0.04 |
0.04 |
0.03 |
0.03 |
0.04 |
Suppl.
Gaseous Fuels |
0.01 |
0.01 |
0.01 |
0.01 |
0.01 |
0.01 |
Total New
Supply |
1.892 |
1.890 |
1.979 |
2.024 |
1.811 |
1.986 |
|
|
|
|
|
|
|
Working
Gas in Storage |
|
|
|
|
|
|
Opening |
3.057 |
3.149 |
2.933 |
2.324 |
1.679 |
1.296 |
Closing |
3.149 |
2.933 |
2.324 |
1.679 |
1.296 |
1.106 |
Net
Storage Withdrawal |
-0.092 |
0.216 |
0.609 |
0.645 |
0.383 |
0.190 |
|
|
|
|
|
|
|
Total
Supply |
1.800 |
2.106 |
2.588 |
2.669 |
2.193 |
2.176 |
|
|
|
|
|
|
|
Balancing
Item |
-0.151 |
-0.151 |
-0.212 |
0.019 |
0.187 |
0.080 |
|
|
|
|
|
|
|
Total
Primary Supply |
1.649 |
1.955 |
2.376 |
2.688 |
2.380 |
2.256 |
|
|
|
|
|
|
|
DEMAND (Trillion Cubic Feet) |
|
|
|
|
|
|
Lease
& Plant Fuel |
0.097 |
0.097 |
0.102 |
0.102 |
0.092 |
0.101 |
Pipeline
Use |
0.049 |
0.063 |
0.081 |
0.089 |
0.076 |
0.071 |
Delivered
to Consumers |
1.503 |
1.794 |
2.194 |
2.495 |
2.211 |
2.083 |
Residential |
0.249 |
0.473 |
0.704 |
0.915 |
0.803 |
0.662 |
Commercial |
0.194 |
0.273 |
0.359 |
0.437 |
0.404 |
0.356 |
Industrial |
0.869 |
0.881 |
0.949 |
0.996 |
0.885 |
0.929 |
Elec
Utility |
0.191 |
0.168 |
0.182 |
0.147 |
0.119 |
0.136 |
Total
Demand |
1.649 |
1.955 |
2.376 |
2.687 |
2.379 |
2.255 |
Source: Energy Information Administration, Short-Term Energy Outlook,
January 2003.