Natural Gas

Overview:

Compared with Wednesday, July 23, natural gas spot prices were lower at all locations in the Lower 48 States in trading on July 30. For the week (Wednesday-Wednesday), prices at the Henry Hub decreased 19 cents or about 4 percent to $4.69 per MMBtu. The price of the NYMEX futures contract for August delivery at the Henry Hub closed on Tuesday, July 29 at $4.693 per MMBtu, down roughly 18 cents or 4 percent since last Wednesday. The NYMEX futures contract for September delivery became the near month contract on Wednesday, July 30, settling at $4.668 per MMBtu (or 18 cents less than last Wednesday's price.) Natural gas in storage increased to 2,032 Bcf as of Friday, July 25, which is about 12 percent below the 5-year average. The spot price for West Texas Intermediate (WTI) crude oil decreased $0.56 per barrel or roughly 4 percent since last Wednesday to trade yesterday at $30.69 per barrel or $5.29 per MMBtu.

 

 

Prices:

Prices have fallen at virtually all market locations since last Wednesday, July 23, with declines of 10 to 34 cents per MMBtu at most locations. Despite rising cooling load in key consuming market areas in Texas and the West, the continuing high rate of storage refill in recent weeks likely contributed to the price drops. The majority of the declines occurred on Friday, July 25, as price declines ranged between 14 and 29 cents per MMBtu at most market locations. Lessened demand owing to moderating temperatures elsewhere in the Lower 48 States reinforced the pattern of declining prices. Since Wednesday, July 23, the largest price decreases principally occurred in the California and Rocky Mountains regions, falling more than 25 cents per MMBtu. Since July 1, 2003, prices have fallen 7 to 12 percent at most market locations in the Lower 48 States. Nevertheless, prices remain significantly higher than last year at this time at all market locations, with prices at the Henry Hub about 57 percent greater than last year's level.

 

Spot Prices ($ per MMBtu)	Thur.	Fri.	Mon.	Tues.	Wed.
	24-Jul	25-Jul	28-Jul	29-Jul	30-Jul
Henry Hub	4.88	4.68	4.67	4.72	4.69
New York	5.28	5.03	5.03	5.06	5.04
Chicago	4.89	4.72	4.70	4.75	4.71
Cal. Comp. Avg,*	4.81	4.61	4.55	4.59	4.52
Futures ($/MMBtu)
Aug delivery	4.731	4.706	4.700	4.693	expired
Sept delivery	4.704	4.691	4.665	4.638	4.668
Oct delivery	4.744	4.729	4.695	4.671	4.693
*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 August delivery at the Henry Hub fell about 17 cents per MMBtu since Wednesday, July 23, to close at $4.693 per MMBtu on Tuesday, July 29. This is the lowest settlement price for the August contract since January 3, 2003. In its first day as the prompt month on Wednesday, July 30, the September contract gained 3 cents to $4.668 per MMBtu, or a decline of 18 cents since last Wednesday. The basis differential between the Henry Hub spot price and futures prices shows a pattern of increase for each successive month from September 2003 through January 2004, which provides incentives to inject natural gas in storage. Specifically, in trading yesterday (July 30), the October 2003 contract roughly equaled the Henry Hub spot price, and the January 2004 contract exceeded the spot price by 61 cents.

 

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.

 

Storage:

Working gas in storage was 2,032 Bcf as of Friday, July 25, 2003, climbing past the 2 trillion cubic foot mark for the first time since January 17, 2003, according to the EIA Weekly Natural Gas Storage Report (See Storage Figure). This is roughly 12 percent below the 5-year average for the report week, and 20 percent below the level last year for the same week. The implied net injection during the week of June 27 was 83 Bcf, which is about 51 percent more than the 5-year average injection of 55 Bcf for the week, continuing the pattern of robust net injections into storage. Over the last 15 weeks, net additions into storage totaled 1,409 Bcf or 94 Bcf per week. The year-on-year storage deficit has declined for the fourteenth week in a row, falling 35 Bcf to 502 Bcf. To reach the 3 trillion cubic foot mark by November 2003, net injections would have to average roughly 69 Bcf per week over the next 14 weeks. (See Temperature Map.) (See Deviation Map)

 

All Volumes in Bcf	Current Stocks 7/25/03	Estimated Prior 5-Year (1998-2002) Average	Percent Difference from 5 Year Average	Implied Net Change from Last Week	One-Week Prior Stocks 7/18/03
East Region	1,160	1,303	-11.0%	63	1,097
West Region	300	306	-2.0%	0	300
Producing Region	572	680	-15.9%	20	552
Total Lower 48	2,032	2,289	-11.2%	83	1,949
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:

LNG Imports Surge in Second Quarter: Imports of liquefied natural gas (LNG) in the Lower 48 States rose to 129 Bcf during the second quarter of 2003, according to preliminary estimates by the Office of Fossil Energy (OFE). Including first quarter deliveries of 75 Bcf, LNG imports through the first half of the year total 204 Bcf, a pace that will likely result in LNG volumes for 2003 far exceeding the 1979 record total of 252.6 Bcf. Deliveries for the second quarter were 67 percent higher than imports during the quarter last year, as relatively high U.S. prices attracted numerous spot cargoes, particularly to the Trunkline LNG terminal in Lake Charles, Louisiana. The Lake Charles terminal received 30 cargos for total imports of 73 Bcf, more than double the volume received during the first quarter. The terminal's average daily send-out for the quarter was approximately 800 million cubic feet, which is higher than its baseload capacity but about 80 percent of its peak capacity. Lake Charles received cargos from Algeria, Nigeria, and Trinidad. Distrigas' terminal in Everett, Massachusetts, received 17 cargos for a total of 37.9 Bcf. All deliveries were from Trinidad. El Paso's Elba Island terminal received 18 Bcf from 8 shipments, all of which also were from Trinidad. In total, Trinidad, where Trains 2 and 3 are operational at the Atlantic LNG facility, was the source country for 86 Bcf. Dominion's Cove Point, Maryland, facility, which received a test cargo this week, was not in operation during the second quarter. Cove Point will add up to 1 Bcf/d of peak import capacity during the third quarter.

 

Summary:

Moderating cooling demand for natural gas in most parts of the country and continuing robust injections into storage contributed to declining prices at most locations across the Lower 48 States and at the NYMEX futures market. Working gas in storage increased to 2,032 Bcf, which is 12 percent below the 5-year average.

 

Natural Gas Summary from the Short-Term Energy Outlook