Overview: Thursday, June 12, 2003 (next release 2:00
p.m. on June 19)
Moderate temperatures across
the country except in the Southwest contributed to natural gas spot prices
easing 25 to 50 cents per MMBtu since Wednesday, June 4. On the week
(Wednesday, June 4-Wednesday, June 11), the Henry Hub spot price dropped 35
cents per MMBtu to $6.06. The NYMEX futures contract for July delivery at the
Henry Hub fell about 16 cents per MMBtu to $6.213. Natural gas in storage as of
Friday, June 6, increased to 1,324 Bcf, which is 25.2 percent below the 5-year
average. The spot price for West Texas Intermediate (WTI) crude oil rose $2.36
per barrel on the week to yesterday’s (June 11) closing price of $32.17 per
barrel, or $5.55 per MMBtu.
Natural gas spot prices at many market locations in
the Lower 48 States have declined for three consecutive trading days from
Friday peaks as key market areas in the Midwest and the Eastern seaboard have
experienced unseasonably cool weather. Although prices remain elevated, the
slackened demand for natural gas for electric generation has contributed to
prices generally softening across the board. For the week, the spot price at
the Henry Hub dropped about 6 percent to $6.06 per MMBtu, while other pricing
points on the Gulf Coast showed slightly greater declines and fell below the
$6-mark. The overall easing of prices may reflect also the slightly improving
storage picture as injections in 7 of the past 8 weeks have exceeded the 5-year
average with a record net addition reported last Thursday. Although the storage
refill season started slowly, injections have increased considerably, with at
least one major interstate pipeline serving the Northeast, Tennessee Gas
Pipeline, announcing restrictions to shippers due to injection nominations
exceeding capacity. The spot price at Tennessee Gas Pipeline’s Zone 6, which
serves major citygates in New York and other Northeastern states, this week
fell 47 cents per MMBtu to $6.30. In contrast to the East, prices in the West
moved higher early in the week, as maintenance on El Paso Natural Gas in the
San Juan Basin restricted deliveries from the region and a heat wave sparked
buying at pricing locations in California and New Mexico. The spot price at the
Southern California border surged 61 cents per MMBtu on Monday to $5.78, but
has since dropped to $5.51, which is a net decline of 51 cents since Wednesday,
June 4.
|
Spot Prices ($ per MMBtu) |
Thur. |
Fri. |
Mon. |
Tues. |
Wed. |
|
5-Jun |
6-Jun |
9-Jun |
10-Jun |
11-Jun |
|
|
Henry Hub |
6.17 |
6.26 |
6.25 |
6.08 |
6.06 |
|
New York |
6.52 |
6.58 |
6.59 |
6.41 |
6.39 |
|
Chicago |
6.16 |
6.26 |
6.20 |
6.05 |
6.02 |
|
Cal. Comp. Avg,* |
5.44 |
5.29 |
5.57 |
5.56 |
5.39 |
|
Futures ($/MMBtu) |
|
|
|
|
|
|
Jul delivery |
6.521 |
6.510 |
6.314 |
6.330 |
6.213 |
|
Aug delivery |
6.584 |
6.580 |
6.404 |
6.420 |
6.303 |
|
*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). |
|||||
At the NYMEX, the price of the futures contract for
June delivery at the Henry Hub closed yesterday (June 11) at $6.213 per MMBtu,
which is about 16 cents lower than last Wednesday’s daily settlement. The
near-month contract surged to daily settlements above $6.50 per MMBtu on
Thursday and Friday, which were the highest settlements for a prompt contract
since March 10. However, NYMEX prices reversed course when traders came back
from the weekend as continued moderate temperatures and an increased pace of
storage injections led to the near-month contract falling on Wednesday to its
lowest closing price since May 30. The August contract yesterday settled at
just over $6.30 per MMBtu. Meanwhile, the July 2003-January 2004 spread
increased to 47.4 cents, which is a little more than 11 cents higher on the
week..
|
Estimated Average Wellhead Prices |
||||||
|
|
Dec-02 |
Jan-03 |
Feb-03 |
Mar-03 |
Apr-03 |
May-03 |
|
Price ($ per Mcf) |
3.84 |
4.47 |
5.45 |
6.69 |
4.71 |
4.97 |
|
Price ($ per MMBtu) |
3.74 |
4.36 |
5.31 |
6.53 |
4.59 |
4.85 |
|
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 June 6 was 1,324 Bcf,
which is 25.2 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 of 125 Bcf is the highest
injection in EIA’s 9-year weekly storage database. This occurrence marks the second week in a row that net
injections have established a new record, eclipsing last week’s injection of
114 Bcf. The net injection for the week was roughly 42 percent higher than the
5-year average injection of 88 Bcf for the comparable week, closing the deficit
from average to 446 Bcf. Storage activity in the Producing Region resulted in a
net injection of 42 Bcf, which is more than double the 5-year average injection
of 19 Bcf in the region. Moderate temperatures throughout the Midwest and East
once again provided the opportunity to re-build storage levels as cooling
demand in key demand centers was minimal ((See
Temperature Map) (See Deviation Map).
Throughout the Lower 48 States,
temperatures were approximately 18 percent cooler-than-normal for the week
ending June 7, as measured by cooling degree days, according to the National
Weather Service.
|
All Volumes
in Bcf |
Current
Stocks 6/6/03 |
Estimated
Prior 5-Year (1998-2002) Average |
Percent
Difference from 5 Year Average |
Implied Net
Change from Last Week |
One-Week
Prior Stocks 5/30/03 |
|
|
East Region |
697 |
948 |
-26.5% |
68 |
629 |
|
|
West Region |
241 |
246 |
-2.0% |
15 |
226 |
|
|
Producing
Region |
386 |
577 |
-33.1% |
42 |
344 |
|
|
Total Lower
48 |
1,324 |
1,770 |
-25.2% |
125 |
1,199 |
|
|
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.
|
||||||
Greenspan Testifies on
Natural Gas: Federal Reserve Board
Chairman Alan Greenspan appeared before the House Energy and Commerce Committee
on Tuesday, June 10, to present testimony about current high natural gas prices
and the natural gas industry’s status and outlook. Noting the nation’s current natural gas supply-demand situation
and expressing surprise that this “most important” issue has received so little
attention to date, Greenspan said that current high natural gas prices are not
the result of short-term market forces, but instead a longer-term steady
increase from the $2 gas of the 1990s.
Those relatively low price levels fostered the growth of a huge
gas-consuming infrastructure of industrial facilities and electricity
generators that have contributed to making $2 gas a “relic of the past.” Stating that the nation will never be
self-sufficient in natural gas supply from domestic production, Greenspan said
that the Congress faces tough choices concerning opening additional federal
territory to exploration and production and facilitating the expansion of LNG
import capabilities. Greenspan spoke
favorably about the potential for LNG to help meet growing demand, noting that
natural gas reserves world-wide are vast, and, unlike oil, are more geographically
dispersed, lessening to some extent the risk and uncertainty from foreign
supply disruptions. In addition,
Greenspan reminded the Committee that, while domestic production from
conventional sources may have peaked, production from non-conventional sources
(such as coalbed methane and tight formation production) has been growing and
that those resources are also relatively abundant. Finally, Greenspan expressed his personal opinion that the
Committee should take a fresh look at the possibilities for nuclear power in
the nation’s energy mix.
Natural
Gas Summary from the Short-Term Energy Outlook:
EIA projects that natural gas prices will remain relatively high
this summer and continue at elevated levels through the rest of 2003 (Short-Term
Energy Outlook, June 2003). Natural
gas wellhead prices are expected to average $5.40 per MMBtu in June and remain
above $5.13 through December 2003. Spot prices at the Henry Hub have stayed
well above $5.00 per MMBtu on a monthly basis since the beginning of the year and have been above $6.00 for the first 10
days of June. The low level of underground
storage is the principal reason for these unusually high prices. As of June 6, 2003, working gas stocks were
1,324 Bcf, which is about 35 percent below year-earlier levels and 25 percent
below the 5-year average. Natural gas prices are likely to stay high as long as
above-normal storage injection demand competes with industrial and power sector
demand for gas. Overall in 2003, wellhead prices are projected to increase about $2.33
per MMBtu (the largest U.S. annual wellhead price increase on record) over the
2002 level to a record annual high of about $5.20 per MMBtu. For 2004, prices are projected to ease only
moderately, as supplies are expected to remain tight.
Natural gas production is
expected to increase by 2.2 percent in 2003.
High natural gas prices and sharply higher oil and natural gas field
revenues are driving the resurgence in gas-directed drilling activity following
the downturn in 2002. Domestic production growth should continue in 2004 but,
given recent experience, the extra effort might result in increases of less
than 2 percent. The prospects for significant reductions in natural gas
wellhead prices from the current high levels could hinge on the success of the
new drilling efforts.
Natural gas demand is
expected to remain flat in 2003 and 2004 compared with the 2002 level. Little or no growth this year is likely
despite sharply higher weather-related demand during the first quarter of 2003,
as weakness in overall industrial output and sharply higher prices have
resulted in stagnant or falling demand in the industrial and electric power
sectors. Demand for natural gas this summer is expected to fall by close to 1
percent from last summer’s level, largely because of weather effects in the
power sector. Assuming normal weather, cooling degree-days for the months of
April through September will be about 8 percent less than year-ago levels.
Continued tight market conditions increase the likelihood of price volatility.
Short-Term Natural Gas Market
Outlook, June 2003
|
||||||
|
|
History |
Projections |
||||
|
|
Mar-03 |
Apr-03 |
May-03 |
Jun-03 |
Jul-03 |
Aug-03 |
|
PRICES
($/MMBtu) |
|
|
|
|
|
|
|
Average Wellhead Price |
6.51 |
4.59 |
5.01 |
5.40 |
5.20 |
5.14 |
|
Residential Price |
8.93 |
8.58 |
9.49 |
10.65 |
11.40 |
11.73 |
|
Electric Utilities Price |
7.10 |
7.21 |
6.40 |
6.82 |
6.38 |
6.22 |
|
|
|
|
|
|
|
|
|
SUPPLY
(Trillion Cubic Feet) |
|
|
|
|
|
|
|
Total Dry Gas Production |
1.656 |
1.591 |
1.634 |
1.600 |
1.657 |
1.651 |
|
Net Imports |
0.299 |
0.297 |
0.298 |
0.301 |
0.306 |
0.302 |
|
Imports |
0.354 |
0.349 |
0.353 |
0.356 |
0.363 |
0.360 |
|
Exports |
0.055 |
0.052 |
0.055 |
0.055 |
0.057 |
0.058 |
|
Suppl. Gaseous Fuels |
0.007 |
0.006 |
0.005 |
0.005 |
0.006 |
0.006 |
|
Total New Supply |
1.962 |
1.894 |
1.938 |
1.905 |
1.969 |
1.959 |
|
|
|
|
|
|
|
|
|
Working Gas in Storage |
|
|
|
|
|
|
|
Opening |
0.838 |
0.676 |
0.803 |
1.212 |
1.548 |
1.954 |
|
Closing |
0.676 |
0.803 |
1.212 |
1.548 |
1.954 |
2.288 |
|
Net Storage Withdrawal |
0.162 |
-0.127 |
-0.409 |
-0.336 |
-0.406 |
-0.334 |
|
|
|
|
|
|
|
|
|
Total Supply |
2.124 |
1.767 |
1.529 |
1.569 |
1.563 |
1.625 |
|
|
|
|
|
|
|
|
|
Balancing Item |
0.111 |
0.106 |
0.218 |
0.041 |
0.097 |
0.022 |
|
|
|
|
|
|
|
|
|
Total Primary Supply |
2.235 |
1.872 |
1.747 |
1.610 |
1.660 |
1.647 |
|
|
|
|
|
|
|
|
|
DEMAND
(Trillion Cubic Feet) |
|
|
|
|
|
|
|
Lease & Plant Fuel |
0.102 |
0.101 |
0.106 |
0.105 |
0.107 |
0.107 |
|
Pipeline Use |
0.050 |
0.041 |
0.035 |
0.034 |
0.036 |
0.038 |
|
Delivered to Consumers |
2.083 |
1.730 |
1.606 |
1.472 |
1.517 |
1.502 |
|
Residential |
0.637 |
0.392 |
0.245 |
0.148 |
0.113 |
0.102 |
|
Commercial |
0.364 |
0.257 |
0.182 |
0.139 |
0.134 |
0.133 |
|
Industrial |
0.694 |
0.650 |
0.645 |
0.618 |
0.593 |
0.611 |
|
Electric Power |
0.389 |
0.431 |
0.534 |
0.567 |
0.677 |
0.656 |
|
Total Demand |
2.235 |
1.872 |
1.747 |
1.610 |
1.660 |
1.647 |
Source: Energy Information Administration, Short-Term
Energy Outlook, June 2003.
