for week ending January 7, 2004 | Release date: January 8, 2004 | Previous weeks
Overview:
A massive cold front that began flowing into the Plains
States over this past weekend and spread south and eastward sent spot prices
sharply upward for the first two days of this week. Coupled with the generally smaller net increases seen during the
holiday-shortened New Year's week (Monday, December 29-Friday, January 2), spot
prices have gained more than $1 per MMBtu since Wednesday, December 24, at
nearly every market location. At the
Henry Hub, the spot price rose 27 cents per MMBtu during New Year's week, and
jumped 86 cents per MMBtu since Wednesday, December 31, for a net increase of
$1.13 per MMBtu since Christmas, ending trading yesterday (Wednesday, January
7) at $6.63. On the NYMEX, the contract
for January delivery expired on Monday, December 29, with a final settlement
price of $6.150 per MMBtu. The contract
for February delivery opened as the near-month contract the following day with
a settlement price of $6.600 per MMBtu, and has gained $0.278 per MMBtu since
then with settlement yesterday at $6.878.
EIA reported that natural gas inventories were 2,567 Bcf as of Friday,
January 2, which is 8.3 percent greater than the previous 5-year (1999-2003)
average for the week. Since Wednesday,
December 24, West Texas Intermediate (WTI) crude oil on the spot market has
traded between $32.51 and $33.71 per barrel.
WTI ended trading yesterday at $33.57 per barrel, or $5.79 per MMBtu, up
$1.06 per barrel ($0.18 per MMBtu) from the previous Wednesday (December 29).
Spot prices reacted to the
arrival of the first truly winter-like temperatures west of the Rocky Mountains
thus far this heating season, as daily low temperatures dipped below zero in
some Midwest cities by Tuesday (January 6), and reached the teens and single
digits in many cities in the New England, Middle Atlantic, and South Atlantic
Census Divisions. Meanwhile, several
major cities in the Pacific Contiguous Census Division extended their run of
below-normal average temperatures to 10 days, while average lows at some
Rockies locations fell 13 degrees below normal on Monday and Tuesday. As a result, prices increased at every
market location on Monday and Tuesday, with most increases ranging from around
$0.40 to well over $1 both days. Prices
topped $7 per MMBtu at most locations in the Midwest and the Gulf, and
approached $9 in the Northeast. Spot prices retreated somewhat on Wednesday as
weather forecasts called for slight moderation in the cold towards the end of
the week. Coupled with the smaller net
increases that occurred during the holiday-shortened last week of 2003,
regional average prices have recorded cumulative increases since December 24 of
$1.03 per MMBtu in California to $2.27 per MMBtu in the Northeast. In the Midwest, the Chicago citygate price
reached $7.02 before falling back yesterday to $6.56—an increase of $1.14 from
December 24. Several Northeast
locations had cumulative increases of $2.93 to $3.28 per MMBtu. At Iroquois Zone 2, the spot price increased
from $5.81 to $9.09 per MMBtu, a jump of 56 percent. The highest-priced spot gas in yesterday's trading was for
Algonquin citygates, at $9.13 per MMBtu.
Spot Prices ($ per MMBtu) |
Mon |
Tue. |
Wed |
Mon. |
Tue. |
Wed. |
29-Dec |
30-Dec |
2-Jan |
5-Jan |
6-Jan |
7-Jan |
|
Henry Hub |
5.46 |
5.96 |
5.77 |
6.26 |
7.04 |
6.63 |
New York |
5.83 |
6.35 |
6.23 |
7.77 |
8.57 |
8.16 |
Chicago |
5.54 |
6.02 |
5.86 |
6.64 |
7.02 |
6.56 |
Cal. Comp. Avg,* |
5.40 |
5.73 |
5.51 |
6.14 |
6.58 |
5.90 |
Futures ($/MMBtu) |
|
|
|
|
|
|
Jan delivery |
6.150 |
expired |
expired |
expired |
expired |
expired |
Feb delivery |
6.243 |
6.600 |
6.189 |
6.827 |
7.082 |
6.878 |
Mar delivery |
5.993 |
6.300 |
5.996 |
6.630 |
6.905 |
6.693 |
*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). |
Note: Spot
and futures markets were closed on Thursday and Friday, January 1-2, 2004.
On the NYMEX, the January contract
ended trading on Monday, December 29 at $6.150 with a drop of $0.229 per
MMBtu. Nonetheless, as the near-month
contract, January had gained nearly 25 percent, with an increase of $1.225 per
MMBtu over its settlement of $4.925 on November 26, its first day as the
near-month contract. Since beginning as
the new near-month contract on Tuesday, December 30, the February contract's
settlement price has mirrored the changes in the spot market, albeit at less
extreme levels. The February contract
topped $7 per MMBtu for the first time since December 19 on Tuesday (January
6), settling at $7.082 per MMBtu. In
yesterday's trading, it dropped back just over 20 cents to settle at $6.878 per
MMBtu.
Estimated Average
Wellhead Prices |
||||||
|
Jul-03 |
Aug-03 |
Sep-03 |
Oct-03 |
Nov-03 |
Dec-03 |
Price ($ per Mcf) |
4.91 |
4.72 |
4.58 |
4.43 |
4.34 |
5.08 |
Price ($ per MMBtu) |
4.79 |
4.60 |
4.46 |
4.32 |
4.23 |
4.95 |
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 2,567 Bcf as
of Friday, January 2, according to EIA's Weekly
Natural Gas Storage Report. The implied
net withdrawal of 52 Bcf was 61 percent less than the previous 5-year
(1999-2003) average net withdrawal of 144 Bcf.
Stock levels stood at 8.3 percent greater than the 5-year average as of
January 2. (See Storage Figure) Only
the West region, with an implied net withdrawal of 19 Bcf, exceeded its average
net withdrawal for the week, yet stocks there remained 3.1 percent greater than
the 5-year average. The Producing
region recorded a net increase of 1 Bcf, only the second time in the 11-year
span of weekly data that this has occurred in the first week of the year in
that region. Unusually warm weather in
much of the eastern United States during the week covered by this storage
report undoubtedly contributed to lower than average storage withdrawals. (See Temperature Map.)
(See Deviations Map.) According to the latest data from the
National Weather Service, gas-customer weighted heating degree days (HDD) were
considerably less than normal for the seven Census Divisions east of the Rocky
Mountains. HDDs ranged from 27.1
percent less than normal in the New England Census Division to 45.0 percent
less in the West South Central.
All Volumes
in Bcf |
Current Stocks
1/2/04 |
One-Week
Prior Stocks 12/26/03 |
Implied Net
Change from Last Week |
Estimated
Prior 5-Year (1998-2002) Average |
Percent
Difference from 5 Year Average |
|
East Region |
1,495 |
1,529 |
-34 |
1,404 |
6.5% |
|
West Region |
319 |
338 |
-19 |
309 |
3.2% |
|
Producing
Region |
753 |
752 |
1 |
658 |
14.4% |
|
Total Lower
48 |
2,567 |
2,619 |
-52 |
2,371 |
8.3% |
|
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 966
for the week ending December 31, according to Baker-Hughes Incorporated. This
is the highest rig count since the week ended September 14, 2001. The number of
natural gas rigs is nearly 34 percent greater than last year at this time, and
over 40 percent above the 5-year average for the report week. The rig count climbed nearly 37 percent in
2003, contrasting with the previous year's decline of about 5 percent. During
2003, the total number of rigs drilling for oil or gas increased by 264. However, the number of offshore rigs at the
end of the year was 104, down 7 from the end of 2002. This trend continued a pattern of decline that has persisted
since January 2001 when offshore rigs last peaked at 181. Meanwhile, the number of land-based rigs
more than offset the offshore drilling declines in 2003, increasing by 271 rigs
principally in Texas, Oklahoma, Wyoming, New Mexico, and Colorado. This
reflects the growing prominence of the Rocky Mountains region in natural gas
production, highlighting a shift from conventional gas fields to unconventional
gas fields, i.e., tight sands, shales, and coalbeds. The share of rigs drilling
for natural gas was 86 percent for the report week, remaining consistently
above 80 percent since May 2001. This
is the longest period of time in the more than 16 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.
Natural Gas Summary from the Short-Term Energy Outlook:
The Energy Information Administration (EIA) projects
that natural gas wellhead prices will average $5.57 per MMBtu in January 2004
and $5.40 in February, and then decrease to $4.77 in March as the heating
season winds down (Short-Term
Energy Outlook, January 2004). Spot prices were quite
variable in December, with prices at the Henry Hub starting the month at around
$5.00 per MMBtu, spiking to roughly $7.00 in the middle of the month, then
falling to $5.50 toward the end of the month as warmer-than-normal weather
eased demand. Spot prices will likely remain well above $5.00 over the next few
months if normal or colder weather prevails, especially with oil prices
remaining at relatively high levels. (Oil prices this winter are expected to average $31.35 per barrel (19 cents higher
than last winter's average), or $5.41 per MMBtu.) Natural gas storage levels were
8 percent above average as of January 2, which could place downward pressure on
prices if warm temperatures and weak heating demand occur later this winter,
just as rising prices are possible if the weather becomes colder. Overall in 2004, natural gas wellhead prices
are expected to average $4.73 per MMBtu, while spot prices will average nearly
$5.00. In 2005, natural gas spot prices are projected to fall to an average of
$4.83 per MMBtu under the assumption that domestic and imported supply can
continue to grow by about 1-1.5 percent per year.
Early estimates indicate that natural gas production
increased by about 2.0 percent in 2003. Natural gas production is expected to
continue to expand modestly through 2005, as natural gas well completions,
which totaled an estimated 20,000 in 2003, continue to grow to between 21,000
and 22,000 wells per year over the next 2 years. Natural gas demand is expected
to have declined by 2.6 percent in 2003 largely because high prices discouraged
demand in the industrial and electric power.
However, expected growth in the economy, along with somewhat lower projected
annual average prices, are expected to increase demand by about 1.2 percent in
2004. Demand in 2005 is expected to increase by 1.8 percent as the economy
continues to expand and prices ease slightly.
Short-Term Natural Gas Market
Outlook, January 2004
|
||||||
|
History
|
Projections |
||||
|
Oct-03 |
Nov-03 |
Dec-03 |
Jan-04 |
Feb-04 |
Mar-04 |
PRICES
($/MMBtu) |
|
|
|
|
|
|
Average Wellhead Price |
4.31 |
4.23 |
4.97 |
5.57 |
5.40 |
4.77 |
Residential Price |
9.89 |
9.05 |
8.89 |
9.19 |
9.57 |
9.61 |
Electric Utilities Price |
4.67 |
4.54 |
5.42 |
6.79 |
6.13 |
5.26 |
|
|
|
|
|
|
|
SUPPLY
(Trillion Cubic Feet) |
|
|
|
|
|
|
Total Dry Gas Production |
1.627 |
1.607 |
1.647 |
1.668 |
1.555 |
1.671 |
Net Imports |
0.283 |
0.298 |
0.326 |
0.300 |
0.271 |
0.276 |
Imports |
0.343 |
0.359 |
0.387 |
0.359 |
0.328 |
0.339 |
Exports |
0.060 |
0.061 |
0.061 |
0.059 |
0.057 |
0.063 |
Suppl. Gaseous Fuels |
0.006 |
0.007 |
0.007 |
0.008 |
0.006 |
0.007 |
Total New Supply |
1.916 |
1.911 |
1.981 |
1.976 |
1.833 |
1.954 |
|
|
|
|
|
|
|
Working Gas in Storage |
|
|
|
|
|
|
Opening |
2.843 |
3.155 |
3.063 |
2.505 |
1.892 |
1.371 |
Closing |
3.155 |
3.063 |
2.505 |
1.892 |
1.371 |
1.147 |
Net Storage Withdrawal |
-0.312 |
0.092 |
0.558 |
0.613 |
0.521 |
0.223 |
|
|
|
|
|
|
|
Total Supply |
1.604 |
2.003 |
2.539 |
2.589 |
2.354 |
2.177 |
|
|
|
|
|
|
|
Balancing Item |
-0.045 |
-0.208 |
-0.337 |
-0.054 |
0.016 |
-0.012 |
|
|
|
|
|
|
|
Total Primary Supply |
1.559 |
1.795 |
2.202 |
2.535 |
2.370 |
2.165 |
|
|
|
|
|
|
|
DEMAND
(Trillion Cubic Feet) |
|
|
|
|
|
|
Lease & Plant Fuel |
0.091 |
0.090 |
0.093 |
0.092 |
0.085 |
0.092 |
Pipeline Use |
0.046 |
0.055 |
0.070 |
0.080 |
0.073 |
0.063 |
Delivered to Consumers |
1.422 |
1.650 |
2.039 |
2.363 |
2.212 |
2.010 |
Residential |
0.229 |
0.420 |
0.680 |
0.908 |
0.818 |
0.658 |
Commercial |
0.181 |
0.267 |
0.386 |
0.479 |
0.455 |
0.390 |
Industrial |
0.585 |
0.592 |
0.613 |
0.633 |
0.617 |
0.605 |
Electric Power |
0.428 |
0.371 |
0.360 |
0.343 |
0.322 |
0.358 |
Total Demand |
1.559 |
1.795 |
2.202 |
2.535 |
2.370 |
2.165 |
Source: Energy Information Administration, Short-Term
Energy Outlook, January 2004.