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Natural Gas Weekly Update Archive

for week ending October 1, 2003  |  Release date:  October 2, 2003   |  Previous weeks

Overview:

A cold front moved through the Midwest and parts of the Northeast this week, but it failed to bring sustained higher prices. Seasonally mild temperatures in most other areas of the country and little in the way of tropical storm activity resulted in prices easing 20 cents per MMBtu or less since Wednesday, September 24. On the week (Wednesday, September 24-Wednesday, October 1), the Henry Hub spot price dropped 12 cents per MMBtu to $4.47. The NYMEX futures contract for October delivery expired on Friday, September 26, at $4.430, while the contract for November lost about 8 cents on the week to close at $4.677 yesterday (October 1). Natural gas in storage as of Friday, September 26, increased to 2,788 Bcf, which is 1.9 percent below the 5-year average inventory for the report week. The spot price for West Texas Intermediate (WTI) crude oil rose $1.24 per barrel on the week to yesterday's (October 1) closing price of $29.43 per barrel, or $5.07 per MMBtu.

 


 


Prices:

With the exception of the Midwest, moderate weather reigned in most regions of the country this past week, providing a slight easing of prices at most market locations. Another week of the hurricane season also passed without interruption of production, although Hurricane Juan came close to affecting Canadian East Coast production near Sable Island over the weekend, and limited tropical storm activity continued in the Gulf of Mexico. For the week, the spot price at the Henry Hub dropped about 3 percent to $4.47 per MMBtu, while other pricing points on the Gulf Coast showed slightly greater declines, with prices falling below $4.40 at most locations in Louisiana. The overall easing of prices may also reflect the improving storage picture as injections in the previous 2 weeks were the highest fall shoulder-month injections in the nearly 10-year history of EIA weekly storage data. Exceptions to the general price trend included trading in the Midwest, where an early cold front (with temperatures in the 30s) reached as far south as the Ohio River, boosting the price of gas at the Chicago citygate 5 cents per MMBtu on the week to $4.72. Although prices in the West were generally lower on the week by a dime or less, a turbine outage on El Paso Natural Gas in the San Juan Basin boosted prices temporarily. El Paso reduced capacity on its Hanover Crossover system by 145 million cubic feet a day for Monday and Tuesday, and then declared a penalty situation for overpulls, saying its Washington Ranch storage facility was experiencing maximum withdrawals. The spot price at the El Paso non-Bondad trading point surged 31 cents per MMBtu on Tuesday to $4.44, but dropped to $4.28 yesterday, which is a net decrease of 3 cents since Wednesday, September 24.

 

Spot Prices ($ per MMBtu)

Thur.

Fri.

Mon.

Tues.

Wed.

25-Sep

26-Sep

29-Sep

30-Sep

1-Oct

Henry Hub

4.55

4.41

4.57

4.67

4.47

New York

4.88

4.74

5.03

5.06

4.85

Chicago

4.61

4.52

4.75

4.88

4.72

Cal. Comp. Avg,*

4.49

4.24

4.53

4.70

4.54

Futures ($/MMBtu)

 

 

 

 

 

Oct delivery

4.542

4.430

expired

expired

expired

Nov delivery

4.703

4.621

4.895

4.830

4.677

Dec delivery

4.949

4.881

5.130

5.082

4.942

*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 October delivery at the Henry Hub dropped a little over 11 cents per MMBtu on its last day of trading as the near-month contract last Friday to expire at $4.430. The October contract settled almost 50 cents per MMBtu, or 10 percent, lower than the September contract's price at expiration, as seasonably mild temperatures and relatively high storage injections led to a general softening of prices through last month. Still, the October 2003 contract closed a little over 74 cents per MMBtu, or approximately 20 percent, higher than the October 2002 expiry price of $3.686. As the near-month contract, the November contract surged over 27 cents per MMBtu on Monday in response to short-term forecasts for cooler-than-normal temperatures in the Midwest. However, with mild temperatures expected to return throughout the country, the November contract has fallen a cumulative 22 cents in the past two trading sessions to its close of $4.677 yesterday. The January 2004 contract closed yesterday at $5.142, a premium of over 67 cents to yesterday's Henry Hub spot price, providing a strong incentive for storage refill. The average closing price for gas through the peak winter month contracts (December 2003-February 2004) yesterday was $5.063 per MMBtu, while at this time last year the peak winter futures contracts average was $4.264 per MMBtu.

 

Estimated Average Wellhead Prices

 

Mar-03

Apr-03

May-03

Jun-03

Jul-03

Aug-03

Price ($ per Mcf)

6.69

4.71

4.97

5.35

4.91

4.72

Price ($ per MMBtu)

6.52

4.59

4.84

5.21

4.79

4.60

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 as of September 26 was 2,788 Bcf, which is 1.9 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 for the report week was 100 Bcf, marking the third consecutive week of 100 Bcf or greater injections. The implied injection is more than double last year's net injection for the report week of 47 Bcf and about 61 percent more than the 5-year average of 62 Bcf. Throughout the West, warmer-than-normal temperatures during the week may have contributed to demand for gas as a fuel for electric generation, as the Mountain and Pacific regions combined experienced temperatures over 50 percent warmer-than-normal, as measured by cooling degree days (CDDs) for the week ended September 27, according to the National Weather Service. However, seasonally mild temperatures in other areas likely generated little weather-sensitive demand, allowing for the continuing robust levels of net injections. (See Temperature Map.) (See Deviation Map)

 

All Volumes in Bcf

Current Stocks 9/26/03

Estimated Prior 5-Year (1998-2002) Average

Percent Difference from 5 Year Average

Implied Net Change from Last Week

One-Week Prior Stocks 9/19/03

East Region

1,667

1,711

-2.6%

64

1,603

West Region

366

354

3.4%

6

360

Producing Region

755

778

-3.0%

30

725

Total Lower 48

2,788

2,843

-1.9%

100

2,688

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 Market Trends:

Natural Gas Rig Counts: The number of rigs drilling for natural gas climbed by 7 to 943 for the week ending September 26, according to Baker-Hughes Incorporated. This is the second highest rig count since the week ended September 28, 2001, falling 1 rig short of the level reported on August 29, 2003. The number of natural gas rigs is over 27 percent greater than last year at this time, and 30 percent above the 5-year average for the report week. The rig count has climbed nearly 31 percent in 2003, contrasting with last year's narrow decline of less than 1 percent for the same 39-week period. The share of rigs drilling for natural gas was 86.1 percent for the report week, remaining consistently above 80 percent since May 2001. This is the longest period of time in the 15 years that Baker-Hughes has separately reported gas and oil drilling rigs that rigs drilling for natural gas have comprised more than 80 percent of total rigs drilling. The emphasis on gas prospects reflects a relative advantage in the economics of natural gas prospects compared with domestic crude oil prospects.

 

Summary:

Natural gas spot prices at most market locations declined up to 20 cents per MMBtu as moderate temperatures prevailed throughout the Lower 48 States, with the exception of the Midwest. Futures contract prices for delivery through March 2004 also moved lower, by around 6 to 8 cents per MMBtu. Natural gas in storage as of September 26 was 2,788 Bcf, which is a net increase of 100 Bcf from the previous week.

 

Natural Gas Summary from the Short-Term Energy Outlook