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Overview:  Thursday, May 22, 2003 (next release 2:00 p.m. on May 29)

Natural gas spot prices at most market locations in the Lower 48 States have dipped 5 to 20 cents per MMBtu since Wednesday, May 14. Although the slight easing appeared across the board in the eastern two-thirds of the country, declines in the West were more pronounced as Rockies prices fell as much as $0.65 per MMBtu. On the week (Wednesday, May 14-Wednesday, May 21), the Henry Hub spot price dropped 10 cents per MMBtu to $6.07. The NYMEX futures contract for June delivery at the Henry Hub fell just under 12 cents per MMBtu to a close of $6.198. Natural gas in storage as of Friday, May 16, increased to 990 Bcf, which is 34.9 percent below the 5-year average. The spot price for West Texas Intermediate (WTI) crude oil traded at a 4-week high, rising $0.30 per barrel on the week to yesterday’s (May 21) closing price of $29.51 per barrel, or $5.09 per MMBtu.





Despite slight increases at many trading locations yesterday (Wednesday, May 21), spot prices generally declined over the past week as moderate weather patterns dominated the country. An increase of 13 cents per MMBtu to $6.07 at the Henry Hub in Louisiana yesterday was not enough to offset this week’s downward trend, in which most prices along the Gulf Coast had dropped 20-30 cents per MMBtu prior to the start of trading yesterday. Although prices at most trading locations in the Gulf Coast and East Texas still hover near $6 per MMBtu, a lack of cooling demand in most regions and a recent easing of nuclear plant-outages contributed to overall softening of prices through the week. Rockies prices fell more steeply than other producing-region prices as maintenance on Transwestern’s San Juan Lateral reduced flows from the region. On the week, the price at the El Paso non-Bondad location fell 50 cents per MMBtu to $4.69. Meanwhile, the pipeline outage likely contributed to prices strengthening at the Southern California Border, where yesterday’s price of $5.83 was 35 cents higher than last Wednesday. The return of the 1,150 MW Comanche Peak 1 nuclear plant in Texas, which had been offline for about a week following a lightning strike, slightly reduced market tightness in the region. But the 1,250 MW South Texas Project 1 unit remains offline. Other facility outages also occurred this week as ExxonMobil’s Katy processing plant near Houston was shut down after a fire at the complex last week. The rupture of a portion of Houston Pipe Line serving a Texas refinery yesterday stirred trading, but likely had more impact in oil markets than in natural gas markets as the pipeline company said there would be no interruption of service to other customers.


Spot Prices ($ per MMBtu)











Henry Hub






New York












Cal. Comp. Avg,*






Futures ($/MMBtu)






Jun delivery






Jul 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 (


At the NYMEX, the price of the futures contract for June delivery at the Henry Hub closed yesterday (May 21) at $6.198 per MMBtu, which was about 12 cents lower than last Wednesday’s daily settlement. The near-month contract fell more than a combined 30 cents in three trading sessions from last Thursday to Monday. Strong oil prices and renewed concerns about the sufficiency of supplies promptly reversed the downward trend, as the near-month contract gained just over 14 cents per MMBtu on Wednesday. While the near-month contract dropped by just under 12 cents in value over the week, the contracts for next winter have dipped 4-6 cents per MMBtu. As of the NYMEX close on Wednesday, May 21, the 12-month strip, or the average cost of NYMEX futures contracts over the next year, was $6.108 per MMBtu, which is down almost 9 cents from last Wednesday’s average of $6.195.


Estimated Average Wellhead Prices








Price ($ per Mcf)







Price ($ per MMBtu)







Note:  The price data in this table are a pre-release of the average wellhead price that will be published in forthcoming issues of the Natural Gas Monthly.  Prices were converted from $ per Mcf to $ per MMBtu using an average heat content of 1,025 Btu per cubic foot as published in Table A2 of the Annual Energy Review 2001.

Source:  Energy Information Administration, Office of Oil and Gas. 



Working gas in storage as of May 16 was 990 Bcf, which is 34.9 percent below the 5-year average inventory level for the comparable reporting week, according to EIA’s Weekly Natural Gas Storage Report. (See Storage Figure).  The implied net injection was the largest of this year’s refill season at 90 Bcf, which is also about 32 percent more than was injected last year. The 5-year average injection for the week is 79 Bcf. On a regional basis, the implied net change departed most from the average in the Consuming East, where 58 Bcf was injected, which is 21 percent more than the 5-year average for the week in the region. Warmer-than-normal temperatures prevailed through most of the country for the week ending May 17, likely increasing demand for power generation in certain regions. According to the National Weather Service, cooling degree days (CDDs) numbered nearly 50 percent more in the West South Central (See Temperature Map) (See Deviation Map). Although the refill season started off slowly with two weeks of net withdrawals in April, over the past three weeks injections have averaged nearly 12 Bcf per day, which is nearly 3 Bcf per day greater than the pace last year during the same period.


All Volumes in Bcf

Current Stocks 5/16/03

Estimated Prior 5-Year (1998-2002) Average

Percent Difference from 5 Year Average

Implied Net Change from Last Week

One-Week Prior Stocks 5/9/03

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:

NOAA Forecasts Active Hurricane Season: In its seasonal outlook released on Monday, May 19, the National Oceanic and Atmospheric Administration (NOAA) projected that this year’s hurricane season (traditionally, June through November) has a 55 percent chance of exceeding normal levels of activity, and only a 10 percent chance for a below-normal season such as last year.  The average Atlantic hurricane season brings 10 named tropical storms, with 6 reaching hurricane strength and 2 of those classified as “major (i.e., category three (winds 111-130 miles per hour) or higher).”  NOAA’s outlook sees the potential for 11 to 15 tropical storms and 6 to 9 hurricanes, with 2 to 4 reaching the “major” classification.  Last year there were 12 named tropical storms, but only 4 hurricanes, only 2 of which became major storms.  However, as far as the natural gas industry is concerned, last year was a fairly active year as 6 named storms, including 2 hurricanes, roamed through the Gulf of Mexico. 


DOE-Sponsored Research on LNG Delivery Shows Promise: A proposal by a small Texas production company that contemplates combining LNG and salt cavern storage technologies impressed the Department of Energy’s National Energy Technology Laboratory enough to garner $1.5 million for its designers to proceed to feasibility testing for commercial application.  The idea involves delivering LNG to salt cavern storage facilities, where it would be gasified, pressurized, and injected into the salt caverns, thus eliminating the need for LNG storage tanks and their associated regasification infrastructure.  If successful, this new methodology could vastly reduce the cost of the necessary LNG infrastructure with respect to a traditional LNG facility, while also having much greater deliverability than a traditional LNG facility. The idea’s developer contends that, for example, a salt cavern costing $10 million to develop will hold as much gas as a $60 million LNG tank, and can deliver gas at six times the send out rate of a typical LNG tank facility.  According to the idea’s proponent, LNG tankers would discharge their cargoes of LNG the same way as at existing terminals.  However, the new process would simultaneously gasify and pressurize the LNG at the receiving point for direct injection into the salt cavern storage facility.



Natural gas spot and futures prices dipped as moderate weather dominated much of the country. Natural gas in storage as of Friday, May 16, increased to 990 Bcf, which implies a net injection of 90 Bcf from the previous Friday, a pace of nearly 12.9 Bcf of daily injections. Still, spot prices remain at elevated levels near $6 per MMBtu at many production-area trading locations. NYMEX futures prices also indicate higher prices this summer as the June contract closed at $6.198 per MMBtu on Wednesday, May 21.


Natural Gas Summary from the Short-Term Energy Outlook
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