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Overview:  Thursday, April 3, 2003 (next release 2:00 p.m. on April 10)

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)











Henry Hub






New York












Cal. Comp. Avg,*






Futures ($/MMBtu)






Apr delivery






May delivery






Jun delivery






*Avg. of NGI's reported avg. prices for:  Malin, PG&E citygate,

and Southern California Border Avg.

Source: NGI's Daily Gas Price Index (



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






West Region






Producing Region






Total Lower 48






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 Industry/Market Trends:

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.



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

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