for week ending March 19, 2003 | Release date: March 20, 2003 | Previous weeks
Natural gas spot prices
declined at nearly all trading locations for a third consecutive week (March
12-19) as temperatures became more spring-like and space-heating demand
slackened. For the week (Wednesday-Wednesday), prices at the Henry Hub
decreased $0.58 per MMBtu, or 10 percent, to $5.20. The price of the NYMEX
futures contract for April delivery at the Henry Hub fell to its lowest point
since becoming the near-month contract, decreasing for the week about $0.59 per
MMBtu to settle yesterday (Wednesday, March 19) at $5.278. Natural gas in
storage decreased to a record low of 636 Bcf as of Friday, March 14, which is
more than 50 percent below the 5-year average. The spot price for West Texas
Intermediate (WTI) crude oil decreased $7.86 per barrel or about 21 percent
since last Wednesday to trade yesterday at $30.01 per barrel or $5.17 per
MMBtu.
With temperatures already
warming and spring's official arrival imminent, anxieties over short-term
supply availability appeared to lessen this week as spot prices extended a decline
to 3 weeks. Along the Gulf Coast and in Southwest production-areas, declines
for the week were generally in the range of $0.45-$0.75 per MMBtu, with many
spot prices in the production region dropping below $5 for the first time since
mid-January. Declines at trading locations in the Northeast were considerably
higher at about $1.60 per MMBtu on the week as the average regional price fell
to $5.70 per MMBtu on Wednesday (March 19), bringing the transportation basis
from the Henry Hub back down to about 50 cents from its elevated levels of the
last two months. The sharpest price movements of the week came last Friday
(March 14). On Friday, the spot price for delivery in New York off
Transcontinental Gas Pipe Line dropped $1.57 per MMBtu to $5.96, which marked
the first time since December 2002 that this price was below $6. Rockies
trading proved the exception to the rule on the week as wintry weather led to a
strengthening of prices by as much as $0.35 per MMBtu. The price at Opal,
Wyoming, rose $0.15 per MMBtu on the week to $4.13.
At the NYMEX, the price of the futures contract for
April delivery at the Henry Hub on Wednesday (March 19) dropped a little over 6
cents per MMBtu to $5.278 per MMBtu, which is nearly 59 cents, or 10 percent
lower, than last Wednesday's daily settlement. The April contract price, which
in late February traded as high as $8.101 and at a premium of $2.00 per MMBtu
or more to contracts in the out-months, has fallen into general parity with
contracts for the summer months as well as the May contract, which closed
yesterday at $5.263. For the first time since April became the near-month
contract, price backwardation to next winter ended as the April contract price
on Thursday, March 13, settled at $5.361, compared with the January 2004 daily
settlement price of $5.620.
Spot Prices ($ per MMBtu) |
Thur. |
Fri. |
Mon. |
Tues. |
Wed. |
13-Mar |
14-Mar |
17-Mar |
18-Mar |
19-Mar |
|
Henry Hub |
5.75 |
5.17 |
5.33 |
5.13 |
5.20 |
New York |
7.53 |
5.96 |
6.04 |
5.87 |
5.82 |
Chicago |
5.82 |
5.23 |
5.45 |
5.22 |
5.36 |
Cal. Comp. Avg,* |
5.64 |
4.92 |
5.08 |
4.87 |
5.02 |
Futures ($/MMBtu) |
|
|
|
|
|
Apr delivery |
5.361 |
5.429 |
5.507 |
5.339 |
5.278 |
May delivery |
5.381 |
5.424 |
5.440 |
5.320 |
5.263 |
*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). |
Working gas in storage was 636 Bcf or 50.4 percent
below the 5-year average as of March 14, according to EIA's Weekly Natural Gas Storage Report. (See
Storage Figure). This is the lowest aggregate inventory level recorded in EIA's 9-year
storage history, surpassing the former low point of 697 Bcf on April 12, 1996.
On a regional basis, the Consuming East also showed a record low of 267 Bcf,
compared with the former low point of
285 Bcf, which also occurred on April 12, 1996. The implied net withdrawal was
85 Bcf for the Lower 48 States, which is 10 Bcf less than the 5-year average
withdrawal for the week. As has been the case for much of the winter, in the
Mid Atlantic and New England, where major population centers make up much of
the country's space-heating demand, the weather for the week ending March 15
was, respectively, 14 percent and 15 percent colder than normal as measured by
heating degree days (HDDs), according to the National Weather Service. (See Temperature Map) (See Deviation Map) A trend of warmer-than-normal temperatures
in the West this winter continued as HDDs in the region were up to 44 percent below
normal for the week. At 636 Bcf, the week's aggregate inventory level is
exactly 1 Tcf below the level for last year's comparable report week.
All Volumes
in Bcf |
Current
Stocks 3/14/03 |
Estimated
Prior 5-Year (1998-2002) Average |
Percent Difference
from 5 Year Average |
Implied Net
Change from Last Week |
One-Week
Prior Stocks 3/7/03 |
|
East Region |
267 |
680 |
-60.7% |
-64 |
331 |
|
West Region |
172 |
181 |
-5.0% |
-7 |
179 |
|
Producing
Region |
197 |
420 |
-53.1% |
-14 |
211 |
|
Total Lower
48 |
636 |
1,282 |
-50.4% |
-85 |
721 |
|
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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FERC To Hold Technical
Conference on Natural Gas Price Information: The Federal Energy Regulatory Commission
(FERC) announced on Friday that it would hold an all-day technical conference
on April 24 to discuss issues relating to the collection and reporting of
natural gas price information. FERC
indicated that it would like to hear from all parties with an interest in this
issue, including those who report price transactions, those who collect and
publish the data, users of the data, and anyone with proposals for improving
the current procedures. The Commission
further stated its desire to cover all facets of the issue, including how data
are collected, questions of the adequacy of data coverage and reliability and
veracity of data collected, and how best to serve the price discovery needs of
natural gas markets.
MMS' Central Gulf Lease Sale
Draws Strong Industry Response:
Wednesday's (March 19) Central Gulf Lease Sale 185, offered by the Minerals
Management Service (MMS) of the Department of the Interior, attracted 793 bids
totaling $415 million. High bids in the
sale equaled $315.5 million from 74 companies. The strong response to the sale, covering some 561 tracts in about 23.4
million acres offshore Louisiana, Mississippi, and Alabama, apparently
reflected the current high natural gas prices and interest from producers in
the MMS' royalty relief provisions. The shallow waters of the Gulf, defined as
depths of less than 200 meters, drew 374 bids for $237.8 million—by far the
most sought-after area. Natural gas
wells in this shallow-water shelf area that tap into new deep gas reservoirs
(15,000 feet or greater below the seabed) will qualify for exemption from
royalty payments on the first 20 Bcf of production. Meanwhile, the deep water Gulf (800-1,599 meters) received 79
bids totaling $89.2 million, while the ultra-deep water areas of 1,600 meters
or greater water depth drew 63 bids totaling $32.4 million. The MMS expects that an estimated 270 to 650
million barrels of crude oil and 1.59 to 3.30 Tcf of natural gas will be
discovered and produced as a result of this sale.
USGS Completes Assessment of
Appalachian Basin Resources: Estimates of undiscovered,
technically recoverable natural gas in the Appalachian Basin have a mean of
70.2 trillion cubic feet (Tcf), according to the U.S. Geological Survey (USGS).
In an assessment released March 10, the USGS also said estimates of oil have a
mean of 54 million barrels, and estimates of natural gas liquids have a mean of
872 million barrels in the region, which encompasses New York, Pennsylvania,
Ohio, Maryland, West Virginia, Virginia, Kentucky, Tennessee, Georgia, and
Alabama. Undiscovered resources differ from hydrocarbon proved reserves, which
are in discovered fields and demonstrated with reasonable certainty as
recoverable under existing technology and economic conditions. Only a small
part of the undiscovered gas, approximately 4.3 Tcf, is in conventional
accumulations. The vast majority of the gas resources can be found in
unconventional or continuous accumulations such as tight sands, Devonian shale,
and coalbed methane, according to the USGS. The USGS released a similar
assessment of the Rocky Mountain region in December 2002, noting undiscovered
gas totaled about 183 Tcf in five basins.
Summary:
Natural gas prices dropped
10 percent or more as spring-like temperatures finally arrived in most of the
country. Natural gas in storage declined to 636 Bcf as of March 14, a record
low point for inventories. Although inventories are more than 50 percent below
the 5-year average, concerns over short-term supply availability appear to be
easing with the arrival of spring and the end of the traditional heating
season.
Natural Gas Summary from the
Short-Term Energy Outlook