for week ending March 26, 2003 | Release date: March 27, 2003 | Previous weeks
At the Henry Hub, the spot
price declined 29 cents per MMBtu from the previous Wednesday (March 19), as
spot gas traded yesterday (Wednesday, March 26) for $4.91. Both spot and futures prices trended lower
for the week (Wednesday to Wednesday, March 19-26), as mild temperatures in
most of the nation accompanied the first week of spring. On the NYMEX, the settlement price for the
futures contract for April delivery fell a cumulative $0.181 per MMBtu from
last Wednesday's level, to $5.097 per MMBtu at yesterday's close of
trading. Natural gas stocks as of
Friday, March 21 stood at 643 Bcf, which is 47.4 percent less than the previous
5-year (1998-2002) average. The war in
Iraq has caused significant volatility in oil prices over the past week. In yesterday's trading, the spot price for
West Texas Intermediate crude oil fell $4.71 to $28.71 per barrel, or $4.95 per
MMBtu. This is $1.30 per barrel ($0.22
per MMBtu) less than last Wednesday's price.
The spot price at the Henry Hub
yesterday was $4.91 per MMBtu—the first time this price has been below $5 since
January 7. Spot prices overall continued their decline from relative peaks
attained at the end of February, as mild weather in most regions of the country
last week offered some relief from the generally harsh conditions of the
heating season. Even in the Rockies,
where a late-winter blizzard dumped several feet of snow just days before the
first day of spring, temperatures were on the rise by last Friday, with
averages in the upper-30s to mid-40s since then. With daily average temperatures exceeding normal on every day of
the past week, sometimes by double digits, in every region except the
Southwest, weather-driven demand has dwindled significantly. Prices generally declined in 4 of the 5
trading days during the week. For the
week, cumulative price declines ranged from about 25 to 40 cents at most market
locations. The price at the Henry Hub
fell a cumulative $0.29, or about 6 percent, since last Wednesday. Price declines tended to be largest at
Northeast points, where, for example, the TRANSCO Zone 6 price for New York delivery fell 48 cents to $5.34
per MMBtu. In the Midwest, the Chicago
citygate price fell 38 cents to $4.98 per MMBtu, while the average price for
all Midwest locations stood at $5.25 per MMBtu as of yesterday. Regional average prices in all regions
except the Northeast and Midwest ended trading yesterday below $5 per MMBtu
(ranging from $4.05 in the Rockies to $4.90 in Alabama/Mississippi), for the
first time since early January.
On the NYMEX, futures prices for months through the
end of the 2004-2005 heating season have trended downward for almost three
weeks, while the contracts for delivery in April and May extended their
declines to a fourth straight week. The
near-month (April delivery) contract was down a cumulative $0.181 per MMBtu on
the week to $5.097, while the May contract fell $0.116 to $5.147 per
MMBtu. Settlement prices for contracts
for delivery in months through the end of the next heating season all declined
on the week in the range of $0.059 to $0.069 per MMBtu. The highest-priced gas for delivery during
the next heating season as of yesterday was for January delivery at $5.374 per
MMBtu. Since becoming the near-month
contract on February 27, the April contract has fallen $2.388 per MMBtu, or
almost 32 percent. The April contract
ends trading today (March 27).
Spot Prices ($ per MMBtu) |
Thur. |
Fri. |
Mon. |
Tues. |
Wed. |
20-Mar |
21-Mar |
24-Mar |
25-Mar |
26-Mar |
|
Henry Hub |
5.20 |
5.06 |
5.07 |
5.06 |
4.91 |
New York |
5.83 |
5.51 |
5.50 |
5.40 |
5.34 |
Chicago |
5.29 |
5.13 |
5.19 |
5.11 |
4.98 |
Cal. Comp. Avg,* |
4.95 |
4.90 |
4.92 |
4.87 |
4.78 |
Futures ($/MMBtu) |
|
|
|
|
|
Apr delivery |
5.306 |
5.128 |
5.253 |
5.077 |
5.097 |
May delivery |
5.271 |
5.148 |
5.278 |
5.117 |
5.147 |
*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 643 Bcf as of March 21,
according to EIA's Weekly Natural Gas
Storage Report (See Storage Figure), which is 47 percent below the 5-year average. The
implied net change in inventories was a net injection of 7 Bcf, compared with
the 5-year average net change for this week—a net withdrawal of 59 Bcf. While the previous week's total storage
inventory of 636 Bcf set a record low, this most recent week was record setting
in its own right, being the earliest date in the year that total inventories
have recorded a net injection over the 9-plus years of EIA weekly storage
data. Temperatures for the week covered
by this storage report were unusually mild, particularly in the high
gas-consuming areas of the Midwest, Northeast, and Middle Atlantic. (See Temperature Map) (See Deviation Map) Gas
demand for space heating fell significantly in these areas, allowing some
supplies to be injected into storage and resulting in net injections of 10 and
2 Bcf, respectively, in the Consuming East and Producing regions. The net injections contrast sharply with the
5-year averages for these regions, which are net withdrawals of 47 and 11 Bcf,
respectively. According to the latest
data from the National Weather Service, gas-customer weighted heating degree
days for the United States were 35 percent less than normal during the
week.
All Volumes
in Bcf |
Current
Stocks 3/21/03 |
Estimated
Prior 5-Year (1998-2002) Average |
Percent
Difference from 5 Year Average |
Implied Net
Change from Last Week |
One-Week
Prior Stocks 3/14/03 |
|
East Region |
277 |
633 |
-56.2% |
10 |
267 |
|
West Region |
167 |
182 |
-8.2% |
-5 |
172 |
|
Producing
Region |
199 |
409 |
-51.3% |
2 |
197 |
|
Total Lower
48 |
643 |
1,223 |
-47.4% |
7 |
636 |
|
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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Federal Energy Regulatory
Commission Takes Broad Action on
Western Energy Markets. After a 13-month investigation into behavior that may have caused
dramatic price spikes in the California energy markets in 2000 and 2001, the
staff of the Federal Energy Regulatory Commission (FERC) released a report on
Wednesday, March 26, which concluded that an underlying supply-demand imbalance
and flawed market design combined to make a fertile environment for market
manipulation. The Commission reacted to the report on March 26 by taking its
first steps towards enforcement action, issuing orders initiating proceedings
to revoke market based rate authority for certain marketers of gas and
electricity. The Commission also
outlined a series of upcoming actions and reforms designed to ensure that
similar problems will not happen in the future in U.S. markets.
A central finding of the
FERC staff report is that "markets for natural gas and electricity in
California are inextricably linked, and that dysfunctions in each fed off one
another during the crisis." FERC staff
identified principal causes contributing to the inflated natural gas price
level in California during the period from August 2000 through January
2001. First, FERC staff concluded that
the market at Topock, Arizona, was illiquid, allowing a single company, Reliant
Energy, to engage in a trading strategy that substantially increased prices in
California. Second, FERC staff
concluded that traders attempted to manipulate the published price indices
through false reporting. Concluding
that reported spot gas prices were not the outcome of a well-functioning
competitive market, FERC staff recommended that they should not be used in the
California Refund Proceeding. The FERC
staff report and documentation of Commission actions can be obtained on the
FERC web site.
Natural Gas Rig Counts: The number of rigs drilling
for natural gas climbed by 22 to 776 for the week ending March 21, according to
Baker-Hughes Incorporated. This is the highest rig count since the week ended
November 30, 2001. The number of natural gas rigs is over 28 percent greater
than last year at this time, and 24 percent above the 5-year average for the
report week. However, the number of
rigs is over 14 percent below the level reported two years ago for the same
report week. The rig count has climbed
nearly 10 percent in 2003, contrasting with last year's decline of nearly 19
percent for the same 12-week period. The share of rigs drilling for natural gas
was more than 82 percent for the report week, remaining consistently above 80
percent since May 2001. This is the
longest period of time in the 15 years that Baker-Hughes has separately
reported gas and oil drilling rigs that rigs drilling for natural gas have
comprised more than 80 percent of total rigs drilling. The emphasis on gas prospects reflects a
relative advantage in the economics of natural gas prospects compared with
domestic crude oil prospects.
Summary:
Spot and futures prices
continued to decline as much of the nation experienced spring-like temperatures
throughout the week. With 10 days left
in the traditional heating season, the industry recorded net storage injections
two weeks sooner than in any year since 1995. Natural gas stocks as of March 21 stood at 643 Bcf, about 47 percent
below the 5-year average.
Natural Gas Summary from the
Short-Term Energy Outlook