Natural Gas

Overview:

Since Wednesday, October 29, natural gas spot prices have increased at most market locations in the Lower 48 States except in the Gulf of Mexico producing region. For the week (Wednesday-Wednesday), prices at the Henry Hub decreased 5 cents or about 1 percent to $4.45 per MMBtu. Prices climbed in most areas despite moderate temperatures in the Lower 48 States in apparent anticipation of a return to cold temperatures. Yesterday (Wednesday, November 5), the price of the NYMEX futures contract for December delivery at the Henry Hub was nearly 4 cents more than last Wednesday's price. Natural gas in storage increased to 3,155 Bcf as of October 31, which is about 3 percent above the 5-year average. The spot price for West Texas Intermediate (WTI) crude oil gained $1.34 per barrel or about 5 percent since last Wednesday to $30.29 per barrel or $5.222 per MMBtu.

Spot prices were higher at most market locations in the Lower 48 States compared with last Wednesday (October 29). Following steep declines in prices late last week, prices surged in trading since Monday, November 3, climbing between 46 and 99 cents per MMBtu at nearly all market locations. These increases led to net increases for the week (Wednesday, October 29 to Wednesday, November 5) of up to 31 cents at nearly all markets outside the Gulf of Mexico producing region. Despite the price rally since Monday, November 3, prices in the Gulf of Mexico producing region, including Louisiana, East Texas, Mississippi, and Alabama, were up to 15 cents per MMBtu below the levels of last Wednesday, October 29. Most of the largest net price increases for the week occurred in the Midcontinent and Rocky Mountains regions, where prices climbed 17 to 31 cents per MMBtu. At the New York citygate and the Algonquin citygate, which serves the New England area, prices climbed 13 and 16 cents per MMBtu to $5.10 and $5.19, respectively. Contributing factors to the increase in prices likely included falling temperatures, as wintry conditions moved into the Midwest, spurring heating demand for natural gas.

 

Spot Prices ($ per MMBtu)	Thur.	Fri.	Mon.	Tues.	Wed.
	30-Oct	31-Oct	3-Nov	4-Nov	5-Nov
Henry Hub	4.40	3.99	4.12	4.01	4.45
New York	4.79	4.20	4.37	4.39	5.10
Chicago	4.58	4.05	4.32	4.45	4.82
Cal. Comp. Avg,*	4.43	3.96	4.33	4.32	4.55
Futures ($/MMBtu)
Dec delivery	4.710	4.893	4.705	4.727	4.897
Jan delivery	4.948	5.129	4.983	4.977	5.117
*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 December delivery at the Henry Hub gained nearly 4 cents during the week to settle at $4.897 per MMBtu on Wednesday, November 5. Prices of the futures contracts for delivery during the remaining months in the 2003-2004 heating season increased about a penny per MMBtu since last Wednesday. Prices for the December futures contract fluctuated between $4.71 and $4.90 during the week as conflicting weather forecasts seemed to inject some uncertainty in the market about the direction of natural gas demand. However, futures prices climbed roughly 19 cents per MMBtu in trading since Monday, November 3, as colder temperatures moved across the Lower 48 States. The contracts for delivery in the heating season months continued to trade at a premium to the Henry Hub spot price, with, for example, the December 2003 and the January 2004 contracts settling at more than 44 and 66 cents above the Henry Hub spot price on Wednesday, November 5. This relative price pattern remains a strong incentive for additions of natural gas to storage for the winter heating season.

Estimated Average Wellhead Prices
	May-03	Jun-03	Jul-03	Aug-03	Sep-03	Oct-03
Price ($ per Mcf)	4.97	5.35	4.91	4.72	4.58	4.43
Price ($ per MMBtu)	4.84	5.21	4.79	4.60	4.46	4.32
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 3,155 Bcf as of Friday, October 31, 2003, according to the EIA Weekly Natural Gas Storage Report. This is roughly 3 percent above the 5-year average for the report week and 10 Bcf above the level last year for the same week.(See Storage Figure) The implied net injection during the report week was 34 Bcf, which is 70 percent more than the 5-year average of 20 Bcf for the week, continuing the pattern of larger-than-average net injections during the refill season this year. Warmer-than-normal temperatures across most of the Lower 48 States contributed to the continuing net additions of natural gas into storage. (See Temperature Map) (See Deviation Map) With the 34-Bcf net injection of gas into storage, the year-on-year storage deficit, which was almost 800 Bcf at the end of the heating season (March 31), was eliminated as the current stock exceeded the prior year's level for the first time since October 25, 2002.

 

All Volumes in Bcf	Current Stocks 10/31/03	One-Week Prior Stocks 10/24/03	Implied Net Change from Last Week	Estimated Prior 5-Year (1998-2002) Average	Percent Difference from 5 Year Average
East Region	1,871	1,847	24	1,851	1.1%
West Region	399	396	3	372	7.3%
Producing Region	885	878	7	836	5.9%
Total Lower 48	3,155	3,121	34	3,060	3.1%
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. R=Revised

 

Other Market Trends:

New EIA Report Assesses Natural Gas Market Centers/Hubs: Natural gas market centers and hubs have weathered the recent financial turmoil and other changes in the natural gas industry and continue to play a crucial role in industry operations, according to the newly released Energy Information Administration report, "Natural Gas Market Centers and Hubs: A 2003 Update." The report defines a market center/hub as an entity that ". . . provides customers (shippers and gas marketers primarily) with receipt/delivery access to two or more pipeline systems, provides transportation between these points, and offers administrative services that facilitate that movement and/or transfer of gas ownership." According to the report, market centers evolved in the late 1980s as industry restructuring gave rise to the need for services formerly provided by interstate pipeline companies. The report identifies some 37 market centers in the United States and Canada, two less than were enumerated in its first examination of the subject in 1996. Two relatively new and strategically-located centers are the ANR Joliet Hub in northern Illinois and the Cheyenne Hub in northeast Colorado. The former handles large volumes of gas from the Alliance Pipeline system, and the latter handles increasing coal-bed methane production from the Powder River Basin in Colorado and Wyoming. The most active center is the Henry Hub in Louisiana, where business is transacted regularly by more than 180 customers, who have access to 14 interconnecting pipeline systems and a salt cavern storage facility. Market centers have adapted well to changes in the industry, including the financial problems of many gas marketers and the demise of on-line trading platforms precipitated by the Enron collapse, as well as the implementation of FERC Order 637 which requires pipelines to offer some hub-type services to shippers.

 

Summary:

Increasing heating demand for natural gas in most parts of the country contributed to higher prices at most locations across the Lower 48 States and at the NYMEX futures market. Working gas in storage increased to 3,155 Bcf, which is 3 percent above the 5-year average.

 

Natural Gas Summary from the Short-Term Energy Outlook