Overview: Thursday, January 29, 2004 (next
release 2:00 p.m. on February
5)
Spot
prices in most regional markets ended the week (Wednesday-Wednesday, January
21-28) lower, despite severe cold in the Northeast beginning Friday (January
23) and continuing through the weekend.
As a result, prices in the Northeast market proved the major exception
to the downward trend, as cash prices moved up sharply at most locations in the
region. At the Henry Hub, the spot price
was 23 cents per MMBtu lower on the week, or about 4
percent, ending with yesterday’s (Wednesday, January 28) level of $6.04. At the New York Mercantile Exchange (NYMEX),
the futures contract for February delivery showed a modest gain of nearly 6
cents on its final day of trading, closing out at $5.775 per MMBtu. The contract
for March delivery assumes the near-month position beginning today (Thursday,
January 29). The Energy Information
Administration (EIA) reported that natural gas inventories were 2,063 Bcf as of Friday, January 23, which is 8.6 percent greater
than the previous 5-year (1999-2003) average.
West Texas Intermediate crude oil on the spot market fell $1.90 per
barrel, or $0.26 per MMBtu, since last Wednesday
(January 21), ending trading yesterday at $33.63 per barrel, or $5.80 per MMBtu.

Prices:
Spot prices at most locations outside the frigid
Northeast fell for the first three trading days of the week (Thursday, January
23-Monday, January 26), despite deepening cold in most gas consuming areas east
of the Mississippi River. However,
the greatest temperature differences from normal occurred in the Northeast and
prices responded strongly. Frigid
temperatures and icy conditions extended well into the southeast early in the
week, while heavy snow fell in portions of New York and New England on
Wednesday, shutting down schools, businesses and government operations. At least 56 deaths have been attributed to
the weather this week from Kansas to the East Coast. Prices at most Northeast locations increased
five days in a row, with multiple-dollar increases on some days at a few
locations. The largest increase was seen
at Transco Zone 6 for New York delivery, where the price
jumped a cumulative $8.63 per MMBtu for the week, to
$16.15 in yesterday’s (January 27) trading.
Spot prices elsewhere have moved up in the last two days, as
temperatures that had moderated slightly in the Northern Plains states over the
weekend, then in the Midwest on Monday and Tuesday, were well below
normal by Wednesday. Price gains in the
last two days brought prices higher for the week in the Midwest and the Midcontinent. Cumulative increases averaged 20 cents per MMBtu in the Midcontinent,
bringing that region’s average price to $6.04.
Midwest prices averaged 25 cents higher, reaching a regional average of $6.59
per MMBtu. The
Chicago citygate price increased
30 cents, to $6.57 per MMBtu.

On the NYMEX, futures prices declined for the
week. Futures prices fell sharply on
Thursday, apparently in reaction to the unexpectedly low implied storage
withdrawal of 156 Bcf, and fell sharply again on
Monday, despite a National Weather Service short-term forecast for
colder-than-normal temperatures for most of the nation east of the Rockies. Settlement prices for the February and March
contracts fell substantially, extending their week-on-week declines to a third
consecutive week. The February contract
expired yesterday (January 27) with a final settlement price of $5.775 per MMBtu. For the week,
the February contract fell $0.375; since becoming the near-month contract on
December 30, it fell $0.825—a drop of nearly 13 percent. The March contract, which debuts today as the
near-month contract, fell an even greater amount on
the week, declining $0.477 per MMBtu to yesterday’s
settlement of $5.740.
Estimated Average Wellhead Prices
|
|
Jul-03
|
Aug-03
|
Sep-03
|
Oct-03
|
Nov-03
|
Dec-03
|
Price ($ 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.
|
Storage:
Working
gas inventories stood at 2,063 Bcf as of Friday,
January 23, according to the EIA’s Weekly Natural Gas Storage Report. (See Storage Figure) This is
163 Bcf, or 8.6 percent, larger than the previous
5-year (1999-2003) average of 1,900 Bcf for this week
of the year. Further, this level is 334 Bcf (over 19 percent) more than stocks at this point last
year. The implied net withdrawal of 195 Bcf is 18.5
percent more than the 5-year average of 165 Bcf. Temperatures were generally colder than
normal for the eastern half of the nation during the week covered by this
storage report, and much colder than normal around the Great Lakes and in New England and portions of the Middle Atlantic, which includes
major gas consuming markets. (See
Temperature Map) (See Deviations Map)
Six of
the nine Census divisions of the Lower-48 States recorded gas-customer weighted
heating degree days (HDD) for the week that were up to 20.7 percent higher than
normal, resulting in significant storage withdrawals to meet the increased
demand for space heating. If storage
withdrawals for the remaining ten weeks of the traditional heating season match
their respective 5-year averages, inventories as of the beginning of April
would be 1,256 Bcf, which is 163 Bcf,
or nearly 15 percent, more than the 5-year average.

Other
Market Trends:
EIA
Issues Federal Register Notice Withdrawing
Proposal for New LNG Survey: In a Federal Register
notice dated Friday, January 23, the Energy Information Administration
announced that it is withdrawing its proposal for new survey Form EIA–913,
‘‘Monthly and Annual Liquefied Natural Gas (LNG) Storage Reports.’’ On September 16, 2003, EIA issued a Federal Register notice (68 FR 54215)
requesting public comments on the proposed new survey Form EIA–913. The purpose
of the survey would have been to collect data on the inventory levels of LNG
and operational capacities of active LNG storage facilities in the United States. In the September
16, 2003 notice, EIA discussed the proposed survey as well as EIA’s reasons for proposing it. EIA received nine (9) comments, which are
available for review at: http://www.eia.doe.gov/oil_gas/natural_gas/survey_forms/eia913c.pdf. EIA reviewed the proposed survey in light of the
comments, and reconsidered whether the proposed survey was the optimal use of
EIA resources available for collecting and analyzing information on U.S. natural gas
supplies. As a result of this analysis,
EIA decided to withdraw the proposed LNG survey.
Summary:
Spot prices rose sharply in the Northeast, and more
moderately in the Midwest and Midcontinent, as frigid temperatures and
harsh winter weather dominated the week in the Eastern half of the nation. Futures prices, particularly for the winter
delivery months of February and March, fell significantly, as continuing
greater-than-average working gas inventories seem to help assuage near-term
supply concerns. Despite a larger than
normal withdrawal for the week ended Friday, January 23, working gas stocks
remained almost 9 percent above normal.
Natural Gas Summary from the
Short-Term Energy Outlook