Overview:  Thursday, February 6, 2003 (next release 2:00 p.m. on February 13)

Natural gas spot prices climbed between $0.55 and $0.95 per MMBtu at most production-area trading locations since Wednesday, January 29. Strong space-heating demand in the Midcontinent and parts of New England supported prices well over $6 throughout much of the country, but price gains were particularly large at Rockies trading locations. On the week (Wednesday-Wednesday), the Henry Hub spot price jumped $0.62 to an average of $6.24 per MMBtu. The NYMEX futures contract for March delivery gained just under 2 cents per MMBtu on the week to settle at $5.644 on Wednesday, February 5. Natural gas in storage as of Friday, January 31, decreased to 1,521 Bcf, which is 15.9 percent below the 5-year (1998-2002) average. The spot price for West Texas Intermediate (WTI) crude oil rose $0.37 per barrel on the week to yesterday’s closing price of $33.91 per barrel, or $5.29 per MMBtu.

 

 

 

Prices:

With storage inventories steadily declining and yet more cold weather across the country so far this month, spot prices at most Gulf Coast and East Texas trading locations jumped well above futures prices for March delivery. Although market backwardation – when the spot price exceeds futures prices – is not unusual for this time of year, spot prices in the production area suggest a tight physical market as the Henry Hub spot price exceeded the price for March delivery of natural gas by as much as 60 cents per MMBtu. Despite a slight decrease of 2 cents per MMBtu yesterday (February 4), the Henry Hub spot price gained about 11 percent since last Wednesday (January 29) to an average of $6.24. Price gains in the Midcontinent and the Rockies were closer to $1 or more per MMBtu as a cold front moved through the region, reaching as far south as Oklahoma. The price for supplies on El Paso Corp.-owned ANR Pipeline in Illinois jumped 86 cents per MMBtu to $6.04, in part owing to concerns over transportation constraints following the rupture of a segment of the pipeline on Sunday. No injuries have been reported in the incident, and El Paso states that supplies have been successfully re-routed through other loops in the pipeline. Markets in the Mid-Atlantic and New England still command the highest prices in the nation, at an average of $7.37 yesterday, a gain of about 13 cents on the week.

 

At the NYMEX, futures prices traded near two-year highs since last Wednesday (January 29) as declining storage levels have increased supply concerns. The price for the March contract in its first week of trading as the near-month contract gained slightly less than 2 cents per MMBtu to a close of $5.644 per MMBtu. The March contract now trades at nearly a 60-cent premium to the final settlement price of this winter’s January contract (usually the highest price contract of the season), suggesting an increasingly tight market for natural gas. The 12-month strip, or the average price for delivery over the next year, yesterday closed at $5.137 per MMBtu, near a two-year high but down less than 1 cent on the day.

 

Spot Prices ($ per MMBtu)	Thur.	Fri.	Mon.	Tues.	Wed.
	30-Jan	31-Jan	3-Feb	4-Feb	5-Feb
Henry Hub	5.76	5.58	5.72	6.26	6.24
New York	7.42	6.41	6.53	8.02	7.39
Chicago	5.62	5.45	5.70	6.27	6.25
Cal. Comp. Avg,*	5.10	4.93	5.02	5.24	5.27
Futures ($/MMBtu)
Mar delivery	5.583	5.605	5.766	5.762	5.644
Apr delivery	5.270	5.345	5.485	5.512	5.414
*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 as of January 31 was 1,521 Bcf or 15.9 percent below the 5-year average for the week, according to EIA’s Weekly Natural Gas Storage Report. (See Storage Figure) The implied net withdrawal was 208 Bcf, which is 97 Bcf more than the 5-year average withdrawal for the week. In the Mid-Atlantic and New England regions, the weather was, respectively, 10 percent and 4 percent colder than normal as measured by heating degree days (HDDs) weighted for the population with space heating from natural gas, according to the National Weather Service (See Temperature Map) (See Deviation Map).   However, a warm week in the West resulted in HDDs for the United States as a whole being about 9 percent lower than normal for the week. Warm temperatures this winter have resulted in storage inventories in the West region remaining over 20 percent higher than the 5-year average. However, the opposite has occurred in the Consuming East region, where inventories have dropped to 805 Bcf with two months of the traditional heating season remaining. For the Lower 48 States as a whole, withdrawals near the 5-year average for the rest of the heating season would result in inventories dipping to 890 Bcf, which is more than 30 percent less than the 5-year average.  This would be the lowest level of working gas stocks at the end of the heating season since 2001.

 

All Volumes in Bcf	Current Stocks 1/31/03	Estimated Prior 5-Year (1998-2002) Average	Percent Difference from 5 Year Average	Implied Net Change from Last Week	One-Week Prior Stocks 1/24/03
East Region	805	1,063	-24.3%	-141	946
West Region	285	235	21.3%	-11	296
Producing Region	431	510	-15.5%	-56	487
Total Lower 48	1,521	1,808	-15.9%	-208	1,729
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 Releases Report on the Role of LNG in the United States:  The Energy Information Administration (EIA) has posted a feature article on its web site on the role of liquefied natural gas (LNG) in the natural gas industry titled U.S. LNG Markets and Uses. The article examines different aspects of LNG operations, paying particular attention to marine terminals, peak-shaving storage facilities, and facilities serving niche markets such as LNG as a vehicular fuel. LNG is natural gas that has been cooled to about minus 260 degrees Fahrenheit for shipment and/or storage as liquid. LNG imports are an important source of incremental supplies to the US.  Also, LNG from storage is a key supply source for meeting the peak-day demands of local utilities, particularly in the Northeast. The report highlights the role of these LNG storage facilities, as well as proposed expansion plans at existing U.S. LNG import terminals and proposals for new import facilities.

 

Pipeline Disturbance in the Midwest: A critical outage continues in effect along ANR pipeline’s Southwest Mainline upstream of its New Windsor Compressor Station in Illinois, according to a notice to shippers released on Wednesday (February 5). Late Sunday, February 2, a rupture occurred along the pipeline segment, which is located near Viola, Illinois. No injuries were reported as a result of the blast, and natural gas was rerouted, precluding interruptions in service, according to the pipeline company. However, ANR has notified shippers that the availability of interruptible transportation may depend on firm service nominations. Determination of the cause of the rupture likely will not be possible until the results of metallurgical testing of the damaged section of pipeline are available. The ANR Pipeline Company, which is owned by El Paso Corporation, operates roughly 10,600 miles of pipeline serving the central United States with peak-day capacity of 6 billion cubic feet per day.

 

Summary:

Natural gas spot and futures prices registered further gains as cold temperatures blanketed much of the Midcontinent and parts of New England. Natural gas in storage declined to 1,521 Bcf after another large withdrawal totaling 208 Bcf for the week ending January 31. Weekly net withdrawals have totaled over 200 Bcf for three consecutive weeks, resulting in inventories falling to 15.9 percent below the 5-year average.

 

Natural Gas Summary from the Short-Term Energy Outlook