for week ending April 2, 2003 | Release date: April 3, 2003 | Previous weeks
Since Wednesday, March 26,
natural gas spot prices were lower at most locations in the Lower 48 States,
while other locations had narrow gains. For the week (Wednesday-Wednesday), prices at the Henry Hub decreased 2
cents or less than 1 percent to $4.89 per MMBtu. The price of the NYMEX futures
contract for May delivery at the Henry Hub decreased roughly 8 cents per MMBtu
or nearly 2 percent since last Wednesday to settle at $5.065 per MMBtu
yesterday (April 2). Natural gas in
storage increased to 680 Bcf as of Friday, March 28, which is about 43 percent
below the 5-year average. The spot
price for West Texas Intermediate (WTI) crude oil decreased 16 cents per barrel
or less than 1 percent since last Wednesday to trade yesterday at $28.55 per
barrel or $4.92 per MMBtu.
Despite an overall pattern
of softening prices in the Lower 48 States, prices at some market locations
exhibited lingering strength, eking out narrow gains for the week
(Wednesday-Wednesday). Most price
declines ranged up to 12 cents per MMBtu, while most price increases were no
more than 10 cents per MMBtu. Moderating temperatures and a slight narrowing of the year-on-year
storage deficit likely contributed to the decreases. However, price changes generally did not
exhibit any strong regional pattern, indicating that uncertainty about the
sufficiency of supplies may have outweighed softening demand in some
cases. The principal exceptions to this
mixed regional pricing pattern occurred in the Northeast and the Rocky
Mountains regions, which had the largest increases and decreases, respectively,
since last Wednesday, March 26. Price increases in the
Northeast region ranged from 9 to 23 cents per MMBtu, as a blast of chilly
weather interrupted the spring-like temperatures early in the week. Prices at
the New York citygate climbed 23 cents per MMBtu since last Wednesday, remaining
among the highest in the nation at $5.57. Prices in the Rocky Mountain region had substantial decreases, falling
more than $2 per MMBtu at nearly all market locations, with most of the
declines occurring yesterday (April 2) in a single day of trading. These large decreases returned prices in the
Rockies to an average of $2.22 per MMBtu—a level that predominated in October
2002 before the run-up during the winter season.
At the NYMEX, the price of the futures contract for
May delivery at the Henry Hub declined by about 8 cents since Wednesday, March
26, to settle at $5.065 per MMBtu on Wednesday, April 2. The basis differential between the Henry Hub
spot price and the May futures contract declined since last week by roughly 6
cents, falling to 18 cents per MMBtu. However, based on yesterday's (April 2) settlement prices, for the
months through August 2003, each succeeding month's futures price is greater
than the preceding month, causing the differential with the Henry Hub spot
price to increase for each successive contract up to 25 cents per MMBtu. This relative price pattern provides
suppliers with economic incentives to inject gas into storage.
Spot Prices ($ per MMBtu) |
Thur. |
Fri. |
Mon. |
Tues. |
Wed. |
27-Mar |
28-Mar |
31-Mar |
1-Apr |
2-Apr |
|
Henry Hub |
4.86 |
5.07 |
4.98 |
4.90 |
4.89 |
New York |
5.40 |
5.70 |
5.96 |
5.58 |
5.57 |
Chicago |
5.06 |
5.17 |
4.97 |
4.91 |
4.90 |
Cal. Comp. Avg,* |
4.73 |
4.76 |
4.72 |
4.70 |
4.73 |
Futures ($/MMBtu) |
|
|
|
|
|
Apr delivery |
5.146 |
expired |
expired |
expired |
expired |
May delivery |
5.240 |
5.146 |
5.060 |
5.125 |
5.065 |
Jun delivery |
5.280 |
5.186 |
5.100 |
5.168 |
5.119 |
*Avg. of NGI's reported
avg. prices for: Malin, PG&E
citygate, |
|||||
and Southern California
Border Avg. |
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Source: NGI's Daily Gas
Price Index (http://intelligencepress.com). |
Working gas in storage was 680 Bcf as of Friday, March 28, 2003, according to the EIA
Weekly Natural Gas Storage Report, which is roughly 43 percent below the
5-year average for the report week (See Storage Figure). This is about 8 percent below the
lowest level recorded for working gas in storage in the Lower 48 States at the
end of the traditional heating season (March 31). On a regional basis, working
gas stocks in both the Consuming East and Producing regions are both 49 percent
below the 5-year average. Compared with
the beginning of the heating season on November 1, 2002, the level of working
gas in storage has fallen 2,465 Bcf, despite net injections in the past two
weeks. This is the largest cumulative
withdrawal total for any heating season in the 9-year history of the EIA
working gas storage database. The
implied net injection for the week was 37 Bcf, which stands in marked contrast
to the 5-year average change for the week, which is a net withdrawal of 37 Bcf,
and the 61 Bcf withdrawal reported last year. If the trend of weekly net injections continues, this year will mark the
earliest start to the refill season for the period since 1994 when weekly
storage data were initially collected. The increase in working gas stocks reduces the year-on-year storage deficit
by nearly 11 percent. The unusual net
injection can likely be attributed to relative futures and spot prices, and
weather that was warmer than normal throughout most of the United States (See Temperature Map) (See Deviation Map). For the second week in a row, futures prices
for near-month delivery exceeded current spot prices, providing economic
incentives to rely more on current production for supplies and inject gas into
storage. For the week ended March 29,
2003, each region of the country experienced warmer than normal temperatures. Gas-weighted heating degree days were roughly
31 percent below normal in the United States and 35 percent below last year at
this time.
All Volumes
in Bcf |
Current
Stocks 3/28/03 |
Estimated
Prior 5-Year (1998-2002) Average |
Percent
Difference from 5 Year Average |
Implied Net
Change from Last Week |
One-Week
Prior Stocks 3/21/03 |
|
East Region |
305 |
595 |
-48.7% |
28 |
277 |
|
West Region |
167 |
185 |
-9.7% |
0 |
167 |
|
Producing
Region |
208 |
407 |
-48.9% |
9 |
199 |
|
Total Lower
48 |
680 |
1,186 |
-42.7% |
37 |
643 |
|
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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MMS Announces New Incentives
for Gulf Gas Production: The Minerals Management
Service (MMS) unveiled proposed new incentives to increase deep gas production
in the Gulf of Mexico. The incentives, which would apply to approximately 2,400
existing leases in the shallow-water areas of the Gulf, include a royalty
suspension on the first 15 Bcf of gas produced from 15,000 to18,000 feet below
the seabed and on the first 25 Bcf produced from a well 18,000 feet or more
below the seabed. To help offset the high risk associated with drilling to deep
gas prospects, the MMS is also proposing a "dry-hole" incentive. If an operator
drills a dry hole at a target reservoir at a depth of 18,000 feet or more, a
supplemental royalty suspension would be applied to 5 Bcf of future production
of gas (or the equivalent in oil) from any drilling depth. MMS estimates that
undiscovered resources in the deep gas zones in the shallow waters could total
up to 20 Tcf. Noting recent higher natural gas prices, the agency said it
anticipates that additional production could come on line relatively quickly
with infrastructure such as offshore platforms in place. The proposed rule
implementing the incentives was published in the Federal Register on
March 26. The rule provides for a 60-day comment period.
Summary:
Since Wednesday, March 26,
natural gas spot prices were lower at most locations in the Lower 48 States, while
other locations had narrow gains. Prices at the NYMEX show an increasing trend through August of this
year, providing economic incentives to increase gas in storage. Natural gas in storage increased to 680 Bcf
as of Friday, March 28, which is about 43 percent below the 5-year
average.
Natural Gas Summary from the
Short-Term Energy Outlook