for week ending July 9, 2003 | Release date: July 10, 2003 | Previous weeks
The threat of production interruptions from a
tropical storm and increased cooling demand contributed to natural gas spot
prices climbing 35 to 70 cents per MMBtu at most trading locations in the Lower
48 States since Wednesday, July 2. On the week (Wednesday-Wednesday), the Henry
Hub spot price climbed 51 cents to $5.56 per MMBtu, while spot prices in the
Northeast were slightly higher with gains of nearly 60 cents in response to
regional cooling demand. The NYMEX futures contract for August delivery gained
just over 32 cents per MMBtu to a close of $5.52 on Wednesday, July 9. Working
gas in storage as of Friday, July 4 increased to 1,773 Bcf, which is 15.2
percent below the 5-year (1998-2002) average. The spot price for West Texas
Intermediate (WTI) crude oil rose $0.58 per barrel on the week to $30.87, or
$5.32 per MMBtu.
In this holiday-shortened week, prices moved higher
in three of the four trading sessions as Tropical Storm Claudette appeared in
the Caribbean and seasonal summer heat covered major eastern consuming areas.
With the July 4th holiday (and corresponding slackened industrial
demand) on the horizon last Thursday (July 3), the Henry Hub spot price drifted
under $5 per MMBtu for the first time since April to $4.97. But prices increased at the Henry Hub and
other production-area locations following the holiday in response to Claudette
and hot weather throughout much of the country. In each of the past three
trading days, prices increased 10 to 30 cents per MMBtu at major production
area market centers, resulting in an average spot price yesterday (July 9) of
$5.56 at the Henry Hub and $5.44 at the Katy Hub near Houston, Texas. In the
Northeast, price changes were slightly higher at about 60 cents per MMBtu or
more as hot weather drove demand for electric generation. The price for spot
gas off Algonquin Gas Transmission in New England rose 69 cents per MMBtu to
$6.08. Prices in the West, including the Rockies, also registered strong gains
of 40 cents per MMBtu and higher as temperatures in parts of Nevada, Arizona,
and California soared well above 100 degrees for most of the week. The Southern
California Border price increased 54 cents on the week to $5.24 per MMBtu.
Spot Prices ($ per MMBtu) |
Thur. |
Fri. |
Mon. |
Tues. |
Wed. |
3-Jul |
4-Jul |
7-Jul |
8-Jul |
9-Jul |
|
Henry Hub |
4.97 |
4.97 |
5.20 |
5.41 |
5.56 |
New York |
5.27 |
5.27 |
5.70 |
5.96 |
5.96 |
Chicago |
5.03 |
5.03 |
5.23 |
5.38 |
5.53 |
Cal. Comp. Avg,* |
4.57 |
4.57 |
4.87 |
5.07 |
5.21 |
Futures ($/MMBtu) |
|
|
|
|
|
Aug delivery |
5.226 |
holiday |
5.381 |
5.503 |
5.520 |
Sept delivery |
5.270 |
holiday |
5.421 |
5.545 |
5.562 |
*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 futures contract for August
delivery moved up about 32 cents, or 6 percent, since last Wednesday (July 2)
to a daily settlement of $5.52 per MMBtu on Wednesday, July 9. The near-month contract,
which gained in value in each of the four trading sessions this week, is
currently priced about 86 percent higher than the monthly settlement of the
August 2002 contract ($2.97). Nevertheless, the August contract is nearly 19
percent less than its high of $6.58 per MMBtu, reached on June 6. During this
time of year, the NYMEX futures contract for delivery during January of the
upcoming winter season is typically the highest priced contract. The January
2004 contract recently has hovered around the $6-mark, which is a premium of
50-60 cents to the Henry Hub spot price, providing a strong incentive for
storage refill. After slipping to a close of $5.76 per MMBtu last Wednesday
(July 2), the January 2004 contract closed just short of $6.04 in trading yesterday
(July 9). The average closing price at this time last year for the peak winter
futures contracts (December 2002-February 2003) was $3.78 per MMBtu.
Estimated Average Wellhead Prices |
||||||
|
Jan-03 |
Feb-03 |
Mar-03 |
Apr-03 |
May-03 |
Jun-03 |
Price ($ per Mcf) |
4.47 |
5.45 |
6.69 |
4.71 |
4.97 |
5.35 |
Price ($ per MMBtu) |
4.36 |
5.31 |
6.52 |
4.59 |
4.84 |
5.21 |
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 underground storage was 1,773 Bcf as
of July 4, which is 15.2 percent below the 5-year average inventory level for
the report week, according to EIA's Weekly Natural Gas Storage Report (See
Storage Figure) . Continuing a string of relatively large net
injections, the implied net change for the week totaled 111 Bcf, which is 39
percent higher than the 5-year average injection of 80 Bcf and 66 percent
higher than last year's injection of 67 Bcf for the report week. The Producing
and East regions, both of which had inventory levels more than 55 percent below
the 5-year average at one point during the refill season, have narrowed the
difference to 20.8 percent and 15.8 percent, respectively. During the report
week, the weather for the country as a whole was about 7 percent warmer than
normal, as measured by cooling degree days (CDDs) for the week ending July 5,
according to the National Weather Service (See Temperature Map.)
(See Deviation Map.)
However, key markets for cooling demand were considerably cooler than normal. In
the West South Central, including Texas, CDDs were 7 percent below normal. In
the South Atlantic region, CDDs were 23 percent below normal. So far this
refill season, CDDs have numbered 4 percent less than normal and 18 percent
lower than last year.
All Volumes
in Bcf |
Current
Stocks 7/4/03 |
Estimated
Prior 5-Year (1998-2002) Average |
Percent
Difference from 5 Year Average |
Implied Net
Change from Last Week |
One-Week
Prior Stocks 6/27/03 |
|
East Region |
976 |
1,159 |
-15.8% |
69 |
907 |
|
West Region |
283 |
283 |
0.0% |
9 |
274 |
|
Producing
Region |
514 |
649 |
-20.8% |
33 |
481 |
|
Total Lower
48 |
1,773 |
2,090 |
-15.2% |
111 |
1,662 |
|
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. |
||||||
Heating Degree Days Data for Winter 2002-2003
Revised: On July 1,
2003, the National Oceanic and Atmospheric Association (NOAA) issued a
significant revision to its heating degree day (HDD) data for the winter
2002-2003. For the United States as a
whole, gas-customer weighted heating degree days were increased by about 5
percent from the previously published data. As a result, HDDs for the Lower 48 States changed from being nearly 4
percent below normal to more than 1
percent above normal on average in the Lower 48 States. On a regional basis, the revisions resulted
in increases in HDDs ranging between 3 and 7 percent in some major
gas-consuming regions including the East North Central, East South Central, New
England, West North Central, and West South Central regions. Most notably, HDDs in the key gas-consuming region of the East
North Central changed from being 2 percent below normal to 3 percent above
normal. In the gas-intensive Northeast,
HDDs are now estimated to have been between 6 and 8 percent above normal. These
findings could have important implications for understanding natural gas
markets last winter and in particular the record level of withdrawals from
working gas in storage last winter.
Natural
Gas Summary from the Short-Term Energy Outlook:
EIA projects that natural gas prices will remain relatively high
through the rest of 2003, with monthly wellhead prices ranging between $4.31
and $4.96 per MMBtu (Short-Term
Energy Outlook, July 2003). The spot
price at the Henry Hub has been above $5.00 per MMBtu on a monthly basis since
the beginning of the year. The
price topped $6.00 in late May and early June, as concerns escalated about the
ability of the industry to rebuild underground
storage supplies. However, natural gas
storage injections were about 40 percent above normal in June, posting a
record increase of 487 Bcf for the month according to STEO estimates. As of
July 4, working gas stocks were 1,773 Bcf or 15 percent less than the 5-year
average. A month earlier, working gas stocks were about 26 percent below the
5-year average. Despite the improvement in the storage situation, above average
prices and strong gas-directed drilling efforts will be needed to attain
sufficient inventory levels by the beginning of the heating season. Overall in 2003, wellhead prices are projected to show an increase of about $2.00
per MMBtu (the largest U.S. annual wellhead price increase on record) over the
2002 price, pushing the average for the year to about $4.85 per MMBtu. In 2004, prices are projected to drop by 13
percent as the overall supply situation improves slightly, assuming normal
weather.
Natural gas production is expected to increase by 3 percent in 2003 and hold at improved levels in 2004. High natural gas prices and sharply higher oil and natural gas field revenues are driving the resurgence in gas-directed drilling activity this year following the downturn in 2002. The number of rigs drilling for natural gas surpassed 900 in June and totaled 925 in the first week of July. On the imports side, natural gas imports from Canada were down slightly on a year-to-year basis for the first quarter of 2003, but imports of liquefied natural gas (LNG) totaled 75 Bcf in the first 3 months of 2003 compared with 26 Bcf for the same period in 2002. While expanded LNG imports could conservatively add about 140 Bcf of additional supply in 2003, total LNG volumes are still likely to contribute less than 10 percent to total natural gas imports into the United States.
Natural gas demand is expected to remain flat in
2003 compared with the 2002 level, despite the high weather-related demand
during the first quarter of 2003. Demand for natural gas this summer is expected to fall by more than 3
percent from last summer's level, because of the effect of higher prices on the
industrial and electricity-generating sectors. Also, assuming normal weather, cooling degree-days for the season (Q2
2003 and Q3 2003) will be about 12 percent less than last summer's levels. In
2004, demand is expected to increase by about 1 percent from the 2003 level,
mainly because of somewhat weaker prices and higher demand in the electric
power sector.
Short-Term Natural Gas Market
Outlook, July 2003
|
||||||
|
History |
Projections |
||||
|
Apr-03 |
May-03 |
Jun-03 |
Jul-03 |
Aug-03 |
Sep-03 |
PRICES
($/MMBtu) |
|
|
|
|
|
|
Average Wellhead Price |
4.59 |
4.84 |
5.05 |
4.96 |
4.55 |
4.31 |
Residential Price |
8.52 |
9.46 |
10.57 |
11.24 |
11.55 |
11.13 |
Electric Utilities Price |
6.87 |
6.01 |
6.28 |
6.00 |
5.50 |
5.20 |
|
|
|
|
|
|
|
SUPPLY
(Trillion Cubic Feet) |
|
|
|
|
|
|
Total Dry Gas Production |
1.625 |
1.672 |
1.623 |
1.681 |
1.673 |
1.602 |
Net Imports |
0.275 |
0.281 |
0.287 |
0.307 |
0.308 |
0.284 |
Imports |
0.334 |
0.341 |
0.345 |
0.367 |
0.368 |
0.342 |
Exports |
0.059 |
0.061 |
0.058 |
0.059 |
0.060 |
0.058 |
Suppl. Gaseous Fuels |
0.006 |
0.006 |
0.005 |
0.006 |
0.006 |
0.006 |
Total New Supply |
1.906 |
1.958 |
1.915 |
1.994 |
1.987 |
1.892 |
|
|
|
|
|
|
|
Working Gas in Storage |
|
|
|
|
|
|
Opening |
0.676 |
0.803 |
1.217 |
1.704 |
2.128 |
2.492 |
Closing |
0.803 |
1.217 |
1.704 |
2.128 |
2.492 |
2.851 |
Net Storage Withdrawal |
-0.127 |
-0.414 |
-0.487 |
-0.424 |
-0.365 |
-0.358 |
|
|
|
|
|
|
|
Total Supply |
1.779 |
1.545 |
1.427 |
1.571 |
1.622 |
1.534 |
|
|
|
|
|
|
|
Balancing Item |
0.014 |
0.032 |
0.062 |
0.015 |
-0.035 |
-0.082 |
|
|
|
|
|
|
|
Total Primary Supply |
1.793 |
1.577 |
1.490 |
1.586 |
1.587 |
1.452 |
|
|
|
|
|
|
|
DEMAND
(Trillion Cubic Feet) |
|
|
|
|
|
|
Lease & Plant Fuel |
0.088 |
0.090 |
0.087 |
0.089 |
0.089 |
0.085 |
Pipeline Use |
0.056 |
0.047 |
0.042 |
0.044 |
0.045 |
0.041 |
Delivered to Consumers |
1.649 |
1.440 |
1.361 |
1.453 |
1.453 |
1.326 |
Residential |
0.412 |
0.250 |
0.148 |
0.115 |
0.103 |
0.120 |
Commercial |
0.268 |
0.182 |
0.136 |
0.128 |
0.130 |
0.134 |
Industrial |
0.608 |
0.571 |
0.541 |
0.564 |
0.579 |
0.559 |
Electric Power |
0.361 |
0.438 |
0.536 |
0.646 |
0.640 |
0.513 |
Total Demand |
1.793 |
1.577 |
1.490 |
1.586 |
1.587 |
1.452 |
Source: Energy Information Administration, Short-Term
Energy Outlook, July 2003.