for week ending July 16, 2003 | Release date: July 17, 2003 | Previous weeks
Spot and futures prices fell significantly during
the week (Wednesday-Wednesday, July 9-16), as working gas inventories continued
to grow strongly, intense summer heat was limited almost exclusively to the
mountainous regions of the West, and Hurricane Claudette's immediate effect on
prices was minimal. In trading at the
Henry Hub, spot prices fell 56 cents from the previous Wednesday (July 9), to
an even $5 per MMBtu. On the NYMEX, the
settlement price of the futures contract for August delivery dipped below $5
per MMBtu, as it closed yesterday (July 16) at $4.934 per MMBtu—the first
sub-$5 settlement for a near-month contract in nearly 4 months. EIA reported
that working gas inventories were 1,866 Bcf as of Friday, July 11, which is
13.9 percent below the previous 5-year (1998-2002) average. The spot price for West Texas Intermediate
(WTI) crude oil traded in a narrow range between $31.04 and $31.60 per barrel
for the week. It ended trading
yesterday with a decline of 40 cents per barrel to $31.20, or about $5.38 per
MMBtu, as oil markets also reacted to Hurricane Claudette's limited impact on
infrastructure and production. For the
week, WTI showed a modest gain of $0.33 per barrel ($0.03 per MMBtu).
Spot prices declined from
last Wednesday's levels, as temperatures moderated in most of the high
gas-consuming areas of the nation from the previous week, with generally
below-normal readings in the Midwest, the Southeast, and along the Gulf Coast
and most of Texas. Cumulative price
decreases ranged from 25 to 65 cents per MMBtu, or from about 6 to about 12
percent, for the week at nearly all locations. The magnitude of price declines was accentuated by the run-up in prices
seen Monday-Wednesday (July 7-9) of the prior week, attributable in part to uncertainty
over the potential effects of then-Tropical Storm Claudette. Despite becoming the first hurricane to
enter the Gulf of Mexico during this hurricane season, and causing force
majeure declarations on El Paso's High Island Offshore System (HIOS), Northern
Natural's Matagorda Offshore Pipeline System (MOPS), and on Enbridge's United
Texas Offshore System (UTOS) as well, Claudette's impact (see Other Market Trends, below) on the
industry was fairly minimal and not enough to avoid widespread price
declines. For example, the Chicago
citygate price fell $0.51 to $5.02 per MMBtu, while spot gas for delivery to
New York citygates fell $0.60 to $5.36. Price declines tended to be the smallest in western markets. Intense
heat in the Southwest and in parts of the Rocky Mountains, and additional demand
for agricultural processing in California, pushed Rockies prices upward on
Monday and Tuesday and created heavy draws on the SOCAL and PG&E systems,
leading to some storage withdrawals reported in the trade press. Nonetheless, the PG&E citygate price
fell 29 cents per MMBtu on the week to $5.01, while the Southern California
Border Average price fell $0.39 to $5.05 per MMBtu.
Spot Prices ($ per MMBtu) |
Thur. |
Fri. |
Mon. |
Tues. |
Wed. |
10-Jul |
11-Jul |
14-Jul |
15-Jul |
16-Jul |
|
Henry Hub |
5.40 |
5.29 |
5.15 |
5.18 |
5.00 |
New York |
5.73 |
5.55 |
5.56 |
5.56 |
5.36 |
Chicago |
5.36 |
5.17 |
5.10 |
5.14 |
5.02 |
Cal. Comp. Avg,* |
5.07 |
4.87 |
4.84 |
4.93 |
4.89 |
Futures ($/MMBtu) |
|
|
|
|
|
Aug delivery |
5.258 |
5.154 |
5.102 |
5.020 |
4.934 |
Sept delivery |
5.300 |
5.193 |
5.141 |
5.047 |
4.950 |
*Avg. of NGI's reported
avg. prices for: Malin, PG&E
citygate, |
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and Southern California
Border Avg. |
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Source: NGI's Daily Gas
Price Index (http://intelligencepress.com). |
On the NYMEX, futures
prices for contracts for delivery through at least the end of next year
declined for five straight trading sessions, beginning last Thursday after EIA's
storage report showing implied net injections of 111 Bcf for the week ended
July 4. On that day, the settlement
prices for contracts through the next heating season fell from over 13 cents
per MMBtu for the April 2004 contract to over 26 cents for the August 2003
contract. Since then, the market seemed
immune to Claudette storm concerns, focusing more on the supply situation that
continues to improve with robust storage refills, continuing paucity of
weather-driven swing demand in major markets, and National Weather Service
short-term temperature forecasts calling for below normal temperatures in much
of the eastern part of the nation. The
near-month (August delivery) contract declined by a nickel to over a dime each
succeeding day since last Thursday, ending trading yesterday (Wednesday, July
16) with a cumulative drop of $0.586 per MMBtu for the week, or nearly 11
percent. The August contract settled
yesterday at $4.934—the first time that the price of gas for delivery in August
has been below $5 since early February.
Estimated Average Wellhead Prices |
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|
Jan-03 |
Feb-03 |
Mar-03 |
Apr-03 |
May-03 |
Jun-03 |
Price ($ 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. |
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Source: Energy Information Administration, Office
of Oil and Gas. |
Working gas in storage increased to 1,866 Bcf as of
Friday, July 11, which is just under 14 percent less than the previous 5-year (1998-2002)
average (See
Storage Figure). The total implied net addition of 93 Bcf
reflected a drop-off from the prior, Independence Day holiday-shortened week,
but is nonetheless over 22 percent greater than the 5-year average of 76
Bcf. With implied net injections in the
East and Producing regions exceeding their respective 5-year averages by nearly
22 and over 46 percent, these regions gained 1.7 and 1.3 percentage points on
the differences from their 5-year averages. The effect of returning industrial load after the holiday week was
partially offset by moderating temperatures in many high gas-consuming
markets. Despite above normal
temperatures on average for most of the non-coastal West and a wide swath of
the nation's midsection as well as along parts of the East Coast for the week
ending Saturday, July 12 (See
Temperature Map.) (See Deviation Map),
the high gas-consuming East North Central, Middle Atlantic, and New England
Census divisions experienced drops in cooling degree days (CDD) from the week
before. Most notable was the cooling
trend in the East North Central division, where CDDs dropped from 37 percent
greater than normal to 2 percent less than normal. Further, even though temperatures increased in the West South
Central division, which normally has the largest summertime air conditioning
load that draws heavily on gas-fired generation, temperatures there nonetheless
remained below normal, by 2 percent for the week in terms of CDDs, marking 7 of
the last 8 weeks that CDDs have been below normal in this division.
All Volumes
in Bcf |
Current
Stocks 7/11/03 |
Estimated Prior
5-Year (1998-2002) Average |
Percent
Difference from 5 Year Average |
Implied Net
Change from Last Week |
One-Week
Prior Stocks 7/4/03 |
|
East Region |
1,039 |
1,210 |
-14.1% |
63 |
976 |
|
West Region |
294 |
295 |
-0.3% |
11 |
283 |
|
Producing Region |
533 |
662 |
-19.5% |
19 |
514 |
|
Total Lower
48 |
1,866 |
2,166 |
-13.9% |
93 |
1,773 |
|
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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Production
Loss from Gulf of Mexico: Hurricane Claudette's path through
the western Gulf of Mexico this week caused this season's first production
shut-ins owing to storm activity. Natural gas and oil producers evacuated
offshore platforms and rigs in response to Claudette's threat, resulting in
production losses as of July 16 of 7.3 Bcf of natural gas and 1.2 million
barrels of oil. According to the Minerals Management Service (MMS), shut-ins
reached the highest level on Tuesday, July 15, at 2.7 Bcf/d of natural gas and
about 418,000 barrels of oil. The lost production equaled approximately 18
percent of natural gas production in the Gulf and about 21 percent of oil
production. MMS reported 287 platforms and 47 rigs were evacuated as Claudette
made landfall early in the morning. By Tuesday afternoon, however, workers were
returning to platforms and on Wednesday MMS reported shut-ins of natural gas
production had fallen to 2.2 Bcf/d. The shut-ins appeared to have little impact
on natural gas prices as both cash and futures prices have fallen over the last
two days. By way of comparison, Hurricane Lili and Tropical Storm Isidore
caused shut-ins last fall totaling 90 Bcf of natural gas and 14.4 million
barrels of oil.
Summary:
Spot and futures prices
fell significantly last week, as temperatures were moderate in most major
gas-consuming markets and the impacts of Hurricane Claudette were small and
short-lived. Continuing
larger-than-normal storage injections, including 93 Bcf for the week ended July
11, underscore the improving supply situation.